Performance: Gold vs. other asset classes

It is no secret that the precious metal best lives up to its reputation as a store of value and hedge against inflation in the long run. Various studies such as “The Case for a strategic allocation to gold”, published in 2023 by the World Gold Council, show that gold has outperformed many other asset classes such as equities, bonds, and fiat currencies over the past 20 years. But how does the performance of gold compare to that of European and global equities, emerging markets, government bonds and the euro – over three, five, and ten years?

Gold among the most profitable asset classes over the last 20 years

The longest period analysed in the study was from the end of 2002 to the end of 2022, with gold increasing in value by an average of 8.51 per cent annually over 20 years. During this period, European government bonds offered an annual return of 2.73 per cent, while euro cash saw a return of only 1.08 per cent. In contrast, only high-growth emerging market stocks outperformed gold with a return of 8.98 per cent, as did global ex Europe stocks at 8.54 per cent. European stocks yielded 6.37 per cent p.a.

The shorter the investment horizon, the more volatile the performance

In the short and medium term, numerous factors influence the price development of the precious metal: while gold outperformed almost all other asset classes analysed over the last five years with a performance of 9.53 per cent per year – only global stocks excluding Europe performed even better at 9.87 per cent – the precious metal clearly lagged behind the returns on the equity markets with an annual increase of 3.12 per cent over an investment horizon from the end of 2012 to the end of 2022. During this ten-year-period, however, European government bonds also only offered an average return of 0.8 per cent. In contrast, gold has performed very well over the last three years with a gain of 8.03 per cent, outperforming both European (up 3.07 per cent) and global ex Europe (up 7.66 per cent) stock markets as well as European government bonds (down 6.15 per cent). Over the course of 2023 to date (as at 4 December), gold has increased in value by 11 per cent.