July 24, 2024

Gold Has Outperformed Stocks By 300% Over The Past Decade

By Axel Merk

Superior Performance of Gold

Over recent years, gold has performed remarkably well relative to other asset classes, in terms of both absolute performance and risk-adjusted performance. Over the preceding 10 years, an investment in gold would have significantly outperformed a corresponding investment in the S&P 500 Index or U.S. bonds, not to mention international and emerging market equities. Over the past 10 years, gold outperformed U.S. equities by over three times:

Courtesy: merkinvestments.com

Gold Shines even when Under-performing

Note that even during time periods when gold underperforms other asset classes, as it did during the 20-year time period analyzed above, the addition of a gold component improves the overall risk-adjusted return profile of a risky portfolio. We consider this to be largely driven by the low levels of correlation between the two assets and thus the positive impact it has on the volatility profile of the hypothetical portfolio above. For example, we find that a portfolio comprised 50% gold and 50% the S&P 500 would have exhibited an annualized standard deviation of returns of 12.7% over the 20-year period ended September 30, 2012.  This is a significant reduction to the annualized standard deviation of returns exhibited by a portfolio comprised 100% the S&P 500, which was 19.2% over the same time frame.

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