Gold's yearly returns compared with other major US and UK investments
ANNUAL PERFORMANCE of the major asset classes has varied widely over the last 40 years.
But how widely? And how do the annual returns from gold – the best performing investment of the 21st century so far for UK investors, and the best behind only commercial real estate investment trusts in the US – stand in comparison with stocks and shares, bonds, property and cash?
Here, BullionVault's research team have gathered and published the annual returns data for the major US and UK asset classes since 1977. That year saw UK interest rates slashed as Sterling recovered from the IMF crisis, while inflation's resurgence in the United States continued to hit investment portfolios, leading first to high interest rates, and then to the "long boom" in bond and equity returns as interest rates fell back during the 1980s and '90s.
Two stockmarket crashes, and a global property slump followed after the year 2000. During this period, as our Annual Asset Performance data show, the investment return from gold has come in the top 1 or 2 position seven times, more than any other asset tracked in our study, and beating the total returns from the S&P500 stockmarket index 10 times.
For UK investors (viewed on a more limited range of assets due to poorer availability of consistent data), gold has topped the table 5 times since 2000 and beaten the FTSE All Share 10 times.
Gold's annual performance in 2013 sank to the bottom of the table, recovering in 2014 to beat UK equities for the first time since 2011 – and outperforming overseas equities for US investors thanks to the resurgent Dollar's exchange rate – only to retreat again in 2015, heading for New Year 2016 with a 10% annualized loss for US investors before whipping sharply higher again amid the political shocks to Western markets first of the UK's Brexit referendum and then the election of celebrity real-estate mogul Donald J.Trump to the White House.
Volatility in gold's annual returns outstrips other assets, as the notes to BullionVault's performance tables show. But the lesson from 2008 remains plain. Diversification counts, and gold really does act as portfolio insurance when investors most need it. It should be considered a prime candidate for helping offset the equity, interest-rate and real estate risk of a broader, well-balanced investment portfolio.
All data are total returns, before costs or taxation unless specified, updated for 2016 to market close on Friday, 30 December. The tables are published to inform your thinking, not lead it. All information and analysis must be verified elsewhere should you choose to act.
US Dollar asset-class performance, annual returns for 40 years since 1977: Key
|Inflation||US Consumer Price Index, end-year value|
|Cash||3-month US Treasury bill rate, daily average|
|Bonds||10-year Treasury bond, yield + capital value|
|Stocks||S&P500 index, capital + dividends|
|Non-US stocks||MSCI EAFE (Europe, Africa & Far East), capital + dividends|
|Corporate bonds||BofA Merrill Lynch US Corp Master Total Return Index|
|Commercial real estate||FTSE Nareit All REITs total returns|
|Commodities||Reuters-CRB Continuous Commodity Index (CCI)|
|US Housing||S&P/Case-Shiller Home Price Series|
|Gold||Last London Gold Fix of the year in USD|
Notes on gold's annual performance comparison, US data
- Gold topped this US asset performance table 6 times in the last 40 years, behind commercial real estate (REITs, 11 times), foreign stock markets (9x) and US equities (7x);
- Gold also came bottom 9 times – worse than any other major asset class, and just ahead of commodities (8 times);
- Gold's 40-year change (+669% gross of costs) has beaten inflation (328%), housing (598%, excluding costs + yield) and cash (cumulative 535%). Commodities have dropped below end-1975 levels (-3.05%);
- REITs are the best-performing asset both since 1977 (6,787% cumulative gains on reported performance before costs) and also so far in the 21st century (up 536% since 1999);
- Gold is the next best performer since 1999 (+299%) and then corporate bonds (174%);
- Gold's worst year was 1981, costing US investors 32%. 2008 was the worst year for REITs (down 37%), US stocks (down 37%) and overseas equities (down 43%);
- Since 1977 gold rose in all 3 years when US stocks lost 10% or more, averaging 9.6% gains. It averaged 11.3% when REITs fell the same, rising on 3 of 5 occasions;
- The US stock market has now risen 8 calendar years running, matching its 1980s' bull run and just 1 year behind its 1990s' record stretch;
- Cash interest rates have lagged inflation 16 times since 1977, twelve of them since 2002. Gold rose in all but 3 of those events (2013-2015);
- Gold lagged CPI inflation consistently from 1994-2001. Note that in all of those 8 years cash in the bank beat inflation.
UK Pound asset-class performance, annual returns for 40 years since 1977: Key
|Inflation||UK long-run Retail Price Index (RPI) series|
|Cash||3-month UK Treasury bill rate, daily average|
|Bonds||20-year UK gilts, yield + capital value|
|Shares||FTSE All-Share total returns index|
|Housing||Nationwide HPI to 1982, then Halifax HPI|
|Gold||Last London Gold Fix of the year in GBP|
Notes on gold's annual performance comparison, UK data
- The FTSE has topped this table 16 times in the last 4 decades, five of them since 2000;
- Government bonds come next (10 times), then gold and houses (6x each), and cash (2x);
- Five of gold's 6 winning years have come since 2005;
- UK investors last lost out entirely to inflation when it hit 15% in 1976, the year of the IMF crisis;
- Gold has underperformed the other assets most often, coming bottom 16 times since 1977 (bonds 9, housing 6, shares 5, cash 4);
- Gold is the best-performing asset for UK investors so far in the 21st Century, gaining 423% vs. bonds 189%, housing 167%, FTSE All-Share 110%.