Why are more people investing in gold?

Why are more people investing in gold?

With bar and coin demand up 5% year-over-year, people are investing more in physical gold. A few of many potential reasons for this trend are outlined below.

Gold’s notable performance in the first half of 2023

According to the Word Gold Counsel, gold has been a top performing asset in the first half of 2023, rising 5.4% and outperforming oil, cash, the Bloomberg Commodities Index, Emerging Markets Index, 3-Month T-Bills and the Bloomberg Aggregate Bond Index.

Gold’s exceptional long-term performance

Investors know gold performs well over the long-term. According to an analysis published by Investopedia, since January 1971 (when the dollar was no longer pegged to gold) to December 2019, “gold had average annual returns of 10.6%. Over the same period, global stocks returned 11.3%. Therefore, gold’s performance closely tracked equity market performance over a 48-year period. According to the World Gold Council, over the past 20 years, gold has experienced a compound annual growth rate of 8.95%, second only to 9.98% for the MSCI US Index’s, which measures equities’ performance. Pretty exceptional results!

Gold performs as it should during extreme economic volatility

Investors know gold performs well during times of economic volatility. According to Investopedia, “the annual average return of gold in 2020 was 24.6%, which was the second-highest return among a range of assets that year” (silver was the highest!). The exceptional performance of gold and silver in 2020 reflects how precious metals can perform during periods of economic volatility, such as during the Covid pandemic.

The probability of extreme economic volatility in the future is high

Let’s be honest, not a year goes by without some level of economic volatility. However, this year all eyes are on the high probability that the commercial real estate market is heading for trouble. According to a June 26, 2023 article published by Fortune titled, “Morgan Stanley says commercial real estate will crash harder than during the Great Financial Crisis. Here’s how 5 other top institutions see it playing out,” Morgan Stanley chief investment officer, Lisa Shalett, notes: “More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points.” Pretty serious stuff. And Kiran Raichura, Capital Economics’ deputy chief property economist, suggests that the “35% plunge in office values we’re forecasting by end-2025 is unlikely to be recovered even by 2040.” Wow!

Bottom Line

Gold performs extremely well over the long run when compared to other investment categories. And, during times of economic volatility, gold shines. It is not surprising that more people are conducting their research and deciding to diversify their portfolios with gold.

Maybe it is time to consider the adage, “Don’t wait to buy gold, buy gold and wait!

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Hayes, A. (2023 January 20) Has Gold Been a Good Investment Over the Long Term? Retrieved from https://www.investopedia.com/ask/answers/020915/has-gold-been-good-investment-over-long-term.asp#citation-8Botros, A. (2023 June 26) Morgan Stanley says commercial real estate will crash harder than during the Great Financial Crisis. Here’s how 5 other top institutions see it playing out.

Retrieved from https://finance.yahoo.com/news/morgan-stanley-says-commercial-real-202952701.htmlStaff Writer(s) (2023 July 14) Returns. Retrieved from https://www.gold.org/goldhub/data/gold-returns#from-login=1