Gold was one of the leading investment assets during the past year, in which it registered a revaluation of 24%, highlighting its nature as a refuge asset. However, this rise has not continued so far in 2021, in which several corrections have been registered that have made investors wary.
Despite this, analysts are optimistic regarding the evolution of the precious metal, so this moment may be the ideal time to invest in gold, taking advantage of the low price.
Gold has posted positive returns for 16 of the last 20 years. In most of them, the precious metal has been one of the assets with the greatest appreciation, such as stocks, treasury bonds or commodities.
In addition, it is an asset that works better in the long term and shows an upward trend, despite corrections at specific times, as is happening in 2021.
One only has to look at a graph of the evolution of the price of the metal during the last 20 years to notice a clear upward trend, which is what investors who use it as a means of protecting their assets from monetary devaluation and inflation require. and as help towards retirement.
Gold has an average annual return since 2001 of 10.32%.
The figures speak for themselves: between 2001 and 2020, gold’s average compound annual return has been 10.32%, higher than many other assets. As is often said in the investment environment, past returns do not guarantee future returns, so there is no guarantee that the number will be repeated.
As in the previous case, what matters is the long-term trend. Investing in gold in the short term, hoping for a quick profit is a tactic that can pay off at times, but it is not an appropriate investment strategy.
Gold is an element of protection of the investment portfolio.
According to data handled by USAGOLD, an investment of $100,000 in gold made in January 2001 would be equivalent to about $655,000 today .
If we take the maximum price that gold has reached in this period, in August 2020, that hypothetical investment would have produced no less than $750,000 .
Institutional investors know this and there are many investment funds, especially the most conservative ones, which allocate between 2 and 10% to gold, as an element of investment portfolio protection.
Gold has no political preferences.
An analysis of the latest increases in the price of gold reveals a curious fact, which highlights that the metal is independent of political colours. Its revaluation in recent years has taken place during the terms of four presidents: two Democrats ( Bill Clinton and Barack Obama ) and two Republicans ( George W. Bush and Donald Trump ).
In addition, its most important annual revaluation ( 31.92% in 2007 ) occurred under the mandate of Republican President George W. Bush, while the second ( 29.24% in 2009 ) was under a Democratic president like Barack Obama.
Gold is independent of who runs the Federal Reserve
Although it might seem that whoever controls the monetary policy of the United States also has ascendancy over gold, the truth is that the metal has led a rise in prices that has extended during the terms of four presidents of the Federal Reserve , with four different monetary policies and very different economic circumstances.
They are Alan Greenspan (1987-2006), Ben Bernanke (2006-2014), Janet Yellen (2014-2018) and Jerome Powell (since 2018).
Gold does not need an inflationary environment to rise
Contrary to popular opinion, gold does not only thrive in inflationary environments. In 2001, the average inflation rate was 2.8%. In 2018 it was 2.4%. Between these two years, inflation only exceeded 3% on three occasions, while its lowest record was 0.1% in 2015.
Therefore, some of the years in which gold has had its best performance have not been marked by an inflationary environment, but rather the opposite.
The evolution of the price of gold is only remotely related to the dollar
Nor is it true that gold and the dollar are closely related, and that the possible appreciation or depreciation of the precious metal depends on the state of the US currency.
In January 2001, the Dollar Index (which compares this currency to the euro, the British pound, the Swiss franc, the Swedish krona, the Japanese yen and the Canadian dollar) stood at 113.39 . It is currently at 93.25 points , which means a drop of almost 18% during this period.
On the other hand, the price of gold has grown 6.55 times, a proportion that far exceeds the appreciation of the dollar against any of the other currencies.
The 21st century is the century of gold, not of the stock market
As Michael J. Kosares recalls , in January 2001 the Dow Jones Industrial Average was close to 9,580 points . With the latest increases, it is currently close to 34,000 points , which represents an increase of approximately 353%.
On the other hand, gold has appreciated 650% during this same period, from $270 to $1,760 an ounce, even despite the severe correction it is undergoing so far in 2021.
Despite the fact that it has been the stock markets that have dominated the headlines of the economic press during all these years, the real star has been gold.
