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 1978.
That year saw UK interest rates hiked sharply as inflation returned with a vengeance after Sterling's IMF crisis. The cost of living also jumped in the United States, with inflation jumping near double-digits. That led first to record-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 for US investors. Second only to Commercial Real Estate, that equals the showing by non-US equities, delivering more than twice the total returns from the S&P500 stockmarket index.
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.
Gold in 2017 then reflected fresh volatility in the Dollar's exchange-rate value, lagging domestic and more notably overseas equities but rising 7.2% (data to 13 December) for US investors. British investors, in contrast, saw gold drop 1.4% as the Pound rallied hard from 2016's Brexit-vote plunge.
That meant gold's annual performance lagged the other major UK asset classes, led by the UK stock market's 10.1% total returns. The UK gold price in British Pounds per ounce also lagged inflation – the 20th such negative real return on this 40-year series.
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 has acted as portfolio insurance when investors most needed it. Bullion should a prime candidate when you look for help to 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) and updated for 2017 to market close on Wednesday, 13 December. They will be updated again in New Year 2018 with final end-year figures.
Please note: These 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 1978: 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 5 times in the last 40 years, behind commercial real estate (REITs) and foreign stock markets (10 times each) and US equities (7x);
- Gold also came bottom 9 times – equal to commodities with the worst record of any major asset class;
- Gold's 40-year change (+650% gross of costs) has beaten inflation (298%), housing (498%, excluding costs + yield) and cash (cumulative 482%). Commodities have dropped below end-1975 levels (-3.05%);
- REITs are the best-performing asset both since 1978 (6,227% reported gains before costs) and also so far in the 21st century (up 596% since the end of 1999);
- Gold is the next best performer since 1999 (+327%) and then corporate bonds (190%);
- 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 1978 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 9 calendar years running, beating its 1980s' bull run and matching its 1990s' record stretch;
- Cash interest rates have lagged inflation 16 times since 1978, thirteen 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 1978: 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 to 1982, then Halifax, then ONS|
|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 17 times in the last 4 decades, six of them since 2000;
- Government bonds come next (9 times), then gold and houses (6x each), and cash (2x);
- Five of gold's 6 winning years have come since 2005;
- Inflation averaged 4.5% per year since 1978, gold 6.1%, cash 6.2%, bonds 9.8%, housing 7.2% and shares 12.0%;
- Gold has underperformed the other assets most often, coming bottom 17 times since 1978 (bonds 9, housing 6, shares 5, cash 3);
- Gold is the best-performing asset for UK investors so far in the 21st Century, gaining 416% vs. bonds 201%, housing 179%, FTSE All-Share 132%.