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 1980.
Consumer-price inflation peaked that year at almost 15% in the United States, but overnight interest rates reached 22% as Paul Volcker took over at the Federal Reserve with a mandate to squash the runaway cost of living.
Those record-high interest rates first led to a global economic slump, but they laid the ground for a "long boom" in growth, as well as in bond and equity returns, as inflation retreated and interest rates then 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 (10 times), gold equals the last 20 years' showing by non-US equities. It just beats the count for total returns from US equities, with the S&P500 stock-market index appearing 6 times in the top two places – all of them since 2013.
US investors now start the 2020s after a remarkable year, because 2019 saw shares, bonds, real estate and commodities all rise in price. All of them also beat US inflation, as did cash in the bank.
That last happened in 1971.
For UK investors (viewed on a more limited range of assets due to poorer availability of consistent data), gold has topped the table 6 times since 2000 and beaten total returns from the FTSE All Share 11 times.
Gold's annual performance in 2013 sank to the bottom of the table, delivering its heaviest loss to UK investors in our 40-year series. It then recovered sharply amid the political shocks of 2016 (first the UK's Brexit referendum and then the election of Donald Trump to the White House), stalling in 2017 but topping the table as shares fell in 2018 and showing double-digit gains in the last year of the 2010s.
Note also that, contrary to common thinking, gold doesn't always beat inflation in the cost of living year-to-year. Indeed, it has lagged the RPI index 21 times between 1980 and 2019.
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 2019 to market close on Friday, 6 December. They will be updated again in New Year 2020 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 1980: 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 only 3 times in the last 40 years, behind commercial real estate (REITs) and foreign stock markets (10 times each) and US equities (8x);
- Gold also came bottom 9 times – equal to commodities with the worst record of any major asset class;
- Gold's 40-year change (+180% gross of costs since the 1980 peak) has lagged inflation (235%) and all asset classes bar commodities (32%);
- US stocks are the best-performing asset both since 1980 (7,880% total returns before costs) but REITs win so far in the 21st century, up 747% since the end of 1999;
- Gold is the next best performer since 1999 (404%) and then corporate bonds (225%);
- 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 1980 gold rose in all 3 years when US stocks lost 10% or more, averaging 9.6% gains. So did US Treasury bonds, averaging 13.6% total returns;
- The 2018 loss for US equities snapped a record 9-year run of gains, beating its 1980s' bull run and matching its 1990s' stretch;
- 2019 was the first time since 2008 that cash interest rates didn't lag inflation. Real losses on cash in the bank happened 5 times previously (1980 and then 2002-2005);
- 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 1980: 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||HM Land Registry via 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 (10 times), then gold (6x), houses (5x each) and cash (2x);
- All of gold's 6 table-topping years have come since 2005, although it made double-digit gains 6 times before that;
- Inflation averaged 4.0% per year since 1980, gold 5.2%, cash 5.8%, bonds 10.6%, housing 6.7% and shares 12.8%;
- Gold has underperformed the other assets most often, coming bottom 16 times since 1980 (bonds 7, housing 5, shares 6, cash 6);
- Gold has only matched UK inflation since 1980, behind even cash in the bank. But it remains the 21st Century's best-performing asset so far, gaining 523% vs. bonds 247%, housing 184%, FTSE All-Share 143%.