Average gold price increase of 11 per cent over past 50 years

Investors trust gold as a safe haven and store of value in times of inflation. The fact that it can be a valuable contribution to the overall performance of investors’ portfolios, and not only in times of crisis, has been underpinned by a recent World Gold Council study based on London Bullion Market Association (LBMA) data, which looks into the price development of gold over the past 50 years.

Gold performance: on par with US stocks, exceeding US bonds

Although it generates neither interest nor dividends, an analysis of the US dollar gold price development between 1971 and 2020 showed an average annual price increase of 11 per cent, roughly equivalent to the performance of US stocks and exceeding that of US corporate and government bonds. The precious metal’s stabilising powers on portfolio performance are long-term. They can offset losses incurred by stocks, bonds, or commodities such as oil. Gold shows no correlation to any of these asset classes and can even develop a negative correlation to some in an uncertain market environment or during geopolitical crises.

High price volatility possible in the short term, dry spells in the medium term

Within a single year, the gold price can be extremely volatile, as shown in a study by German precious metal news platform Gold.de: it experienced an overall decrease in 20 of the past 50 years, but gained over the course of the remaining 30 years. Even in the medium term, the gold price is prone to dry spells, with the longest lasting from 1988 to 1992.

However, the maximum gains within one year far exceeded the maximum annual losses: the worst gold performance was in 1981 with a 32.6 per cent price decline, while 1979 saw the best with a 126.55 per cent gain.