Overall, the evidence that investing in gold works as an inflation hedge is relatively weak. During the more muted inflationary environments of the early 1980s and 1988-91, it actually posted negative total returns, on average, and lagged large-cap stocks by a wide margin. Gold did excel during the high inflationary period of the 1970s, when surging oil prices and a rapidly expanding monetary supply pushed inflation to historically high levels in the United States. Gold is often touted as a hedge against inflation, but its record there is more mixed. Toward the end of March, though, gold reversed course and gained about 9.9% in the second quarter alone.Ĭan Investing in Gold Work as an Inflation Hedge? Mine closures and production shutdowns early in the pandemic wreaked havoc on equity precious metals producers. Market observers have attributed this somewhat out-of-character showing to a variety of factors, including liquidity-driven selling and the expectation that interest-rate cuts would help support the dollar. While gold fared much better than large-cap stocks, it still posted a small loss. The novel coronavirus crisis in 2020 was a partial exception. Exhibit 1 illustrates that gold has posted significantly better returns during previous market drawdowns and has generally even notched positive total returns during periods of deep losses in the equity market. Over longer periods, gold has excelled during bear markets and periods of unusually high market volatility. They’re also significantly more volatile than bullion, which only depends on the underlying commodity price.īoth gold stocks and gold bullion have soared recently as the yellow metal (priced at about $1,901 per ounce as of this writing) has hit its highest level since 2011. Because gold stocks have both financial and operating leverage, their results tend to magnify the impact of changes in the price of gold. There are two primary ways to pursue investing in gold: buying the commodity directly (gold bullion) and buying shares in companies that mine and sell gold (gold equity). It can also serve as a hedge against inflation and market volatility. The price of gold is largely independent of other asset classes, and it has also traditionally been used as a refuge against weakness in the dollar. In this article, I’ll take a look at the role gold can play in a portfolio and explain why it deserves a more skeptical look than the current hype might suggest. SPDR Gold Shares ( GLD), an exchange-traded fund that ranks as by far the largest precious metals fund, has scooped up $20.4 billion in estimated net inflows over the past 12 months, increasing its asset base by roughly 30%. In response, money has flooded into gold funds. With the price of gold rising nearly 17% for the first six months of the year, precious metals and commodities funds focusing on gold and other metals have been among the best performers in 2020’s turbulent market.
Original Posts vs.Gold has been one of the hottest performers so far in 2020. We look at the contextual alignment of comments to figure out if something is truly related to a stock/company. For example, we may read in "RY" because it relates to "TLRY", obviously this is wrong but it infrequently showed up on the system because the Hype Score would deflate it (yay Hype Score). Previously, our ingestion system would pull in data that was both accurate but maybe too inclusive or content. There are a few sentiment systems on the market but after doing research we've found many of them to be wrong (in some cases, blatantly wrong) and as a result, we decided to be transparent with our process. We don't consider this IP, because it's about how you read in public data.
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