Home/ Money / Personal Finance/  Gold's decadal returns among the worst in history

Goldhas had a difficult decade. With a return of just 3.4% in rupee terms in the 10 years ending 16 August,goldinvestors have been unable to even beat inflation. This is highly unusual for the precious metal. A Mint analysis of 10-year rolling returns forgold(based on WorldGoldCouncil price data) shows it has delivered a 10-year return lower than 3.4% CAGR only 3% of the time if you look at data starting 1979-89.

On an average,goldhas fetched a 10-year return of 9.8%. Its worst 10-year was 1980-1990. This was when Fed chairman Paul Volker raised rates to unprecedented levels and slew inflation.

Positive real interest rates raised the cost of keeping money in a non-interest-bearing asset likegold. Over this decade,goldwas stagnant with a CAGR of just 0.6%. Its best 10-year period was from 30 November 2001 to 30 November 2011 with 21.3% returns.

The year 2001 marked the bottom of the dot-com crash, a powerful starting point for most assets. Asset prices, including that ofgoldrose throughout the following decade, with some brief interruptions such as the 2008 crisis. In 2011,goldprices surged on a bout of inflation that resulted from central bank money printing, marking a top for the precious metal.

Although its current 10-year return is not at its worst, it certainly sits in a small category.

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According to Navneet Damani, senior VP – Commodity Research at Motilal Oswal Financial Services, the rise in inflationary pressure could continue for the next few months. “Medium-term under performance could continue, however in the long rungoldis likely to beat inflation," he says. Damani adds, “We continue to maintain a neutral stance forgold, because along with the negatives, factors such as geo-political tensions, fears about slower global growth, central banksgoldbuying activity etc. could lend support to prices."

So, should one continue to invest ingold? According to Vishal Dhawan, founder & CEO, Plan Ahead Wealth Advisors,goldprotected investors against adverse movements in other growth assets like equities and against a depreciating rupee which has happened fairly consistently over the years. “This means investors should continue to allocate 5-10% of their portfolios togold. They need to have at least a 10-year investment horizon."


Neil Borate
Neil heads the personal finance team at Mint. A former colleague called them 'money nerds' and that's what they are. They cover topics like mutual funds, taxation and retirement, all to improve your chances of building wealth. Neil graduated with a degree in law and economics. He passed the CFA Level I exam and began his writing career at Value Research, a mutual fund research firm in 2016. He joined the personal finance team Mint in 2019. Everyday, the Mint Money Team tackles personal finance questions such as where to invest and where to borrow, through articles, charts and reader queries. They also have a daily podcast - 'Why Not Mint Money' and an annual ranking of mutual funds - the Mint 20.
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Updated: 23 Sep 2022, 06:31 AM IST
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