Since President Nixon closed the gold window in August of 1971, the price of gold has increased more than 37-fold.
From a price of $40.65 at month-end August 1971, gold has risen to $1,528 today.
A $1,000 investment in gold at the end of August 1971 would be worth over $37,000 today—a compounded annual return of 7.8%. Impressive? Wait till you see how gold compares to Stocks and Bonds?
Gold’s 7.8% return since August of 1971 compares favorably to the 7.4% return that intermediate-term U.S. Treasury securities delivered over the same time.
Gold has even appreciated more than stocks over this period.
From August of 1971 through today, the S&P 500 index has increased at a 7.3% average annual rate. These numbers for the S&P exclude dividends and the reinvestment of dividends.
Gold is an all-weather asset but people have a tendency to only appreciate the diversification benefits in down markets.
Like any investment, though, gold and other metals’ returns are maximized if you invest it long-term.
A study by GraniteShares, an ETF company, revealed that an allocation of just 5% to gold improved the risk-adjusted performance of a standard 60-40 portfolio of stocks and bonds 79% of the time but if you want optimal risk-adjusted performance, they recommend a 60% allocation to equities, 5% to bonds, and 35% to gold.
Their study included investments and data in a 15-year period through December 2018. They recommend a 15-year period because that would be a full economic cycle.
So if you are more than a decade away from retirement or trying to secure your children’s future, re examine your portfolio. It’s time to increase your gold allocation or have some if you don’t have any yet.
Stop treating it as a safe haven investment. Although that is important, gold is more than that.