Gold’s Historical Performance Reviewed

Valued for centuries for its beauty and lasting permanence, gold remains an interesting investment that still attracts global interest. Investors in gold point to its ability to help them ride out recessions and inflationary periods. The annual return of gold has been around 7.6% since President Nixon ended all convertibility of the dollar into gold in 1971. At this point, the price of an ounce of gold was around $40. As of mid-April 2018, the price is around $1,346 an ounce.

Comparing the gains between gold and stocks is tricky, because it largely depends on when either was purchased. Gold and stocks often move in opposite directions, so buying one during an uptick likely means the other was in a downturn, and vice versa.

Pricing milestones for gold and events that impacted its price include:

  • Gold reached over $800 in 1980, but then experienced a long-term bear market from 1980 to 1999 while stocks went on a long-term run.
  • Gold moved past $600 an ounce in 2006 in response to a weak dollar and significant geopolitical tensions.
  • Gold-backed exchange-traded funds reported record funds flowing in during early 2009 due to recession fears.
  • Gold reached record pricing of more than $1,900 an ounce in late 2011, a sharp movement from a price around $250 an ounce in late 1999.
  • Gold pricing may remain flatter during the cryptocurrency boom, as these new currencies are also seen as a “dollar alternative” similar to gold.

Despite its reputation for stability over the long term, gold has experienced some fairly dramatic price swings. In January 1980 it reached a then record high of $850 an ounce due to high inflation, the Soviet invasion of Afghanistan, and the political situation in Iran. Nineteen years later, the price of gold was only around $250 an ounce, a significant drop from its high.

Predicting the future price of gold is exceedingly difficult, as it relates to global stability, recessions, and other unpredictable factors. Investors looking at gold should view it as a long-term strategic move, one that helps shield them from the biggest downturns.

New Opportunities

With the launch of gold-based IRAs, a new crop of investors are gaining exposure to gold. These IRAs function the same as regular retirement vehicles that invest in stocks and bonds, but they invest in actual physical gold. These gold IRAs provide investors with a hedge against inflation and recession, and can be an important part of a balanced retirement portfolio. Many investors are beginning to move back to gold due to global instability and fears that the extended bull market in stocks is overdue for a correction.

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