Gold investments: it pays to go long-term
News (Advertising) Arnulf Hinkel, Finance journalist – 21.06.2017
A short while ago, the German news magazine "Der Spiegel" comprehensively compared how a one-time investment of 10,000 € twenty years ago would have performed until 2017. While placing savings in call money accounts or plain deposit accounts would have brought only small profits or, in the latter case, even losses, real estate purchases would have generated profits of up to 50 percent. A much wiser decision would have been to invest in DAX® constituents which would have experienced an average profit of 170 percent. The best investment, however, would have been gold, with profits of more than €19,000 for an initial investment of €10,000. All in all, the gold price has seen a considerable upward development since the gold exchange standard was abandoned in 1971, although it has been subject to considerable fluctuations. This is best illustrated by analysing percentage changes in the price development of gold from 1970 until today. In the 1970s, the gold price experienced a rise of an almost unbelievable 1.397 per cent in the wake of the oil crisis. This explosive price increase was brought to a sudden halt at the beginning of the 1980s when the Fed raised the US key interest rate to over 17 per cent. Until 1990, the gold price decreased by 24 per cent. This trend continued almost unchanged until the burst of the dotcom bubble: during the 1990s, the gold price again dropped by more than 27 per cent. The 2000s started with the New Economy crisis and ended with the credit crunch. The gold price benefited from these developments with an increase of over 276 per cent. In the current decade, the strong uptrend in the gold price has continued but also slowed down, resulting in a rise of almost 20 per cent from 2010 until today. This shows that long-term investments in gold in particular can be profitable. Over the past half-century, the precious metal has seen an overall excellent performance despite prolonged setbacks.