Gold's Glowing Hype Masks Its Underwhelming Reality
Gold's recent surge has led to increased interest from clients, but experts caution against assuming it's a solid long-term investment. In fact, gold has underperformed equities over the past four decades, returning only 2.8% annually compared to 11.7% for US stocks.
The majority of gold's price appreciation over recent decades has been compressed into the last three years, highlighting the issue of recency bias. This is problematic because it can lead clients to invest in gold based on short-term performance rather than a genuine understanding of its value proposition.
Gold also fails to deliver on its promise as an inflation hedge, with no reliable correlation between gold prices and short-term inflation shocks found in academic analysis. In fact, the price of cornflakes rose faster than the price of gold between 2011 and 2024.