I have devised a new strategy for beating the stock market. All you have to do is own gold. Because gold has outperformed World equities for the past 30 years for UK investors!
Surprised? Well check out the annualised returns:
| Time horizon | Gold (%) | World equities (%) |
| One year | 40.2 | 9.1 |
| Five years | 11.4 | 7.2 |
| Ten years | 11.9 | 9.6 |
| 20 years | 9.2 | 6.7 |
| 30 years | 6.1 | 6 |
Data from The London Bullion Market Association, and MSCI. February 2026. All returns quoted in this article are inflation-adjusted total returns (GBP).
Gold is killing equities by four percentage points a year for the past five years. Though that’s a bit short term for my liking – so how about 2.5 percentage points a year for 20 years?
That’s a lot. It looks like this:
Granted, the return differential is marginal if you go back 30 years: 6.1% gold plays 6% equities. But gold is still ahead.
Plus it’s having an awesome year to date!
If gold keeps going, or the so-called AI bubble pops, then the yellow metal’s lead will spread further back into the historical record like an ink stain soaking through paper.
How long is the long term?
By the yardstick of the average mortal investor, 30 years is a pretty compelling time horizon. It certainly sounds like a long stretch for one asset to have the whip hand, no?
Don’t these numbers also call into question that story about gold basically being a shiny Ponzi scheme?
Well yes, I do think that view is too dismissive. I believe gold is worthy of its place in our portfolios.
But in my opinion the long-run performance figures above are more misleading than clarifying.
It’s not because gold beats equities that it’s useful. It’s because it repeatedly rides to the rescue when stock investors are in despair.
Gold also has a penchant for coming good during periods of uncertainty not unlike the one we’re living through now…
Golden years
The first thing to note though is that gold’s returns are highly sensitive to your chosen start date, which muddies the waters no end.
Here are three reasonable long-term baselines for comparing gold against other assets:
| Time horizon | Gold (%) | World equities (%) | Baseline |
| 51 years | 2.8 | 6.8 | Gold price fully liberated in 1975 |
| 56 years | 4.8 | 5.2 | MSCI World Index inception |
| 126 years | 1.4 | 5.6 | Dawn of the 20th Century |
Inflation-adjusted annualised total returns (GBP).
If I wanted to press the case against gold then I’d quote the 126-year timeline above, and neglect to mention the price was heavily regulated before the shackles finally came off in 1975.
On the other hand, if I was a total gold bug then I’d shout about gold and equities being neck-and-neck over 56 years.
Pick the compromise date of 1975 though and order is restored. Gold has some value as a minor diversifier, while equities remain paramount.
But their relationship is really more complex than that – and a fortuitous one for investors.
Sheer doubloon-acy
The next thing to put on the table is the 31-year mega gold drawdown:
Gold sank 78.3% over 19 years from 1980 until 1999. Buyers sucked in by gold’s 77.6% gain in 1979 (98% nominal!) didn’t break even again until 2011.
That loss weighs heavily on gold’s track record. It distorts average returns around it like a black hole bends light.
So if I pick a long-term comparison date that veers too close to that event horizon, then gold looks weak.
On the other hand, gold’s average return ticks up when observed at sufficient distance from the super-massive scary-thing pressing upon investing space-time.
Both outcomes are true, relative to the observer – as the next chart shows:
Trend lines show inflation-adjusted cumulative total returns (GBP) to 31 December 2025.
A gold investor who went all-in on New Year’s Eve 1979 (green line) would not be as happy as one who entered the market on New Year’s Eve 1969 (yellow line). Meanwhile Mr New Year’s Eve 1999 (purple line) would still be partying like Prince himself.
The upshot? Your entry point matters – as I believe The Purple One knew only too well.
The green line is the path taken by the performance-chaser who piled into gold near its 1980 peak. Notice how this sucker got hammered by gold’s mega drawdown for the first 20 years. Recovery only begins in late 1999. Eventually – more than 25 years after the comeback begins – Mr Green looks back on 2.4% annualised returns.
By contrast, the yellow line enjoys a decade of growth before giving up most (but not all) of its early gains to the 1980-99 abyss. A quarter of a century later, Colonel Mustard or whoever this is, has come through it all to post highly-respectable 4.8% annualised returns.
Finally, gold’s galactic collapse is but a historical curiosity to the purple-lined investor. For them, it’s onwards and upwards to a glittering 8.8% annualised return.
Of course, every asset’s returns are path dependent. But gold’s outcomes can be particularly divergent. Which helps explain why gold ownership is so divisive, and why some are fanatical about it and others indifferent.
In short, it’s why gold tastes of Marmite.
Crisis management
The next chart shows more clearly why gold is worth owning (I hope). See how the yellow line zigs when equities zag:
Gold and equities are both volatile as hell. They’re also extremely careless: losing decades all over the shop.
But for over half-a-century they’ve counterbalanced each other remarkably well.
In fact, nothing else has compensated as effectively as gold for equities’ worrying habit of going nowhere for years.
Meanwhile, equities typically buck up as gold spirals down.
Here’s the numbers for the lost decades for each asset shown in the chart above:
| Lost decades | Equities return (%) | Gold return (%) | Peak loss (%) | Offset at peak loss (%) |
|---|---|---|---|---|
| Dec 1972 – Dec 1984 | 0 | 144.1 | -56.1 | 191.5 |
| Jan 1980 – Jul 2011 | 655.7 | 0 | -78.3 | 665.2 |
| Aug 2000 – May 2014 | 0 | 201 | -50.7 | 8 |
| Oct 2011 – March 2020 | 104.1 | 0 | -40.2 | 53.6 |
Gold counters equities losses, equities counter gold. Inflation-adjusted cumulative total returns (GBP).
Gold returned 144% when equities went sideways for 12 years from 1972 to 1984. During that period, equities losses hit -56% in April 1980. But gold was up 191.5% at the same time.
The rest of the table repeats the same story. You can see how equities counterbalance gold’s peak losses, and vice versa. (Equity drawdowns are shaded in the table and gold’s aren’t. ‘Offset at peak loss’ is the gain of the countervailing asset when the ‘lost decade’ asset registers its worst loss.)
Driven to extraction
As that last table shows, gold refutes the old market adage: all correlations ‘go to one’ in a crisis.
Clearly gold brings its own bag of troubles along with it. But happily, equities help you bear those in turn.
Of course there are no guarantees. Gold wasn’t the best diversifier during the Dotcom Bust. It also dipped 30% initially during the Global Financial Crisis (GFC) before finally answering the alarm call.
There’s almost bound to be a financial disaster eventually that features gold and equities sliding together.
So I’m not arguing for the 60/40 portfolio to be recast as 60/40 split between equities/gold. But I am saying that gold has a solid role to play in smoothing the returns of a well-diversified modern portfolio alongside more traditional bedfellows like bonds and cash.
And yet, I still have my reservations…
Yellow alert
If you view your portfolio assets in isolation – rather than as part of a balanced team – then gold can be hard to live with. Not now, when it’s going gangbusters, but whenever it next fails to shine.
That time will come, probably quite soon, because gold is sickeningly volatile as we saw in the chart above. It’s even more of a rollercoaster ride than equities.
For example, 39% of gold’s annual returns were negative from 1970 to 2025. As opposed to just 28% of years being down for equities.
Moreover gold spent 31 years underwater up until July 2011. It then rose to new highs for all of three months before diving back in the red – where it stayed for another nine years!
Essentially, gold was underwater for over 39 years between 1980 and 2020. (While paradoxically saving the day during the GFC. So again, it depends when you bought in.)
In sum, the barbarous relic is even more painful to own than World equities as a standalone asset. If you can’t handle having your patience sorely tested, then forget about owning the yellow metal.
However, if you are willing to hold an asset for its strategic value – as opposed to highly uncertain short-term profits – then consider allocating a chunk to gold.
So metal
I’ll close out with the latest in a series in which Warren Buffett says in a couple of sentences, 20 years ago, what I struggle to say in a thousand words today.
Here’s a wonderful gold quote from the old maestro that encapsulates the dilemma:
Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.
I completely buy that. You can see from the last chart that gold spikes in eras of great turmoil, when confidence crumbles in the system itself: the Oil Crisis of 1973-74, the Second Oil Crisis of 1979, the GFC, and close cousin the European Sovereign Debt Crisis.
Which brings us up to the current era of instability, which some characterise as a polycrisis. (Sounds more like a depressed parrot to me.)
If you think we’re heading for an age of peace, prosperity, and political harmony, then gold should be redundant. But personally I’m happy to wager 10% of my portfolio on fear.
After all, it looks like fear gains the upper hand quite often:
Take it steady,
The Accumulator
I am a relative goldbug in the monevator clan – I will off my residual crypto allocation at some point though I may consider BOLD which is an unholy gold/BTC mix. But the part you have left out is the stage of life. I have earned all the money I will ever earn, my human capital is zero. I would be lucky to see another quarter-century.
Were I at the start of my career, with human capital but not financial capital, my proportion of networth held in gold would be lower than your proposal, and very definitely less than it is now. I am not displeased with the performance of gold, though I am displeased with holding a lot in my GIA, and I formed this opinion of my own irascible free will, I am no passivista. But I too am mindful of the ancient saying ‘This too shall pass’
Your zig and zag claim is much more convincing in the historical distance than it is now, perhaps convincing up to the GFC at best. I took the time to confirm the Y axis is log scale. Perhaps a better chart would be the SPX to gold chart which saves us from the noise of that depreciation.
I postulate that this is because both gold and equities are telling us something about the value on the Y axis, and that this value is depreciating rapidly in real terms, IMO the GFC sounded the high-water mark of the West. Financial repression is showing its ugly head, and two bells are tolling in synchronism now, ringing out the decline writ in the debasement of the currencies.
At my stage of life all I ask of financial assets is that they roughly hold value, I am the miserable pussycat in the parable of the talents that just wants to dig his shekels into the ground. There are better things to allocate one’s nervous energy to in the second half of life.
It is tiresome and frustrating than this seems increasingly a chimera, what holds value now, what compass know true north? And there is no honest scale for the Y axis, because GBP/USD whatever are being debased shockingly. You see this in the increasing price of essentials like housing, food and power, relative to digital frippery.
And now KOTUS, led like a bull by the nose ring, has made all this worse for the rest of us. Sic transit gloria mundi.
In South Asia – and especially in South India – women are gifted 22 ct gold for their weddings and gold is inherited through the female line. Gold ornaments are bought and sold with one eye to “keeping value”, meaning that ornaments with other stones (e.g. rubies, diamonds) are frowned upon because they don’t retain their value while gold does. When you’re tired of your old jewellery, you can exchange it for new pieces and if there’s a difference in gold weight you can get a cheque for the residual value. All of that contributes to a society where everyone is aware of the prevailing gold price, and gold is very liquid.
I was gifted some gold as part of my wedding in October 2024 – and despite investing £20k in my S&S each year this has been by far the highest-returning asset in my portfolio. (Not that I aim to sell it yet!)
You measure wealth in gold. You don’t, as such, grow your wealth in gold (and you lose it in fiat, of course):
https://monevator.com/does-gold-improve-portfolios/#comment-1913511
I have the miners myself, rather than the metal (GDX/GDXJ mostly, plus some special situations like Serabi, Aya and Goldplat), save for IncomeShares Gold + yield (GLDI); although I’m more interested overall in silver and platinum (and uranium, palladium and copper 😉 ) for the industrial aspects (especially silver’s role in the energy transition technologies, and the looming structural undersupply of copper).
The one thing that’s inflating for sure is politicians’ promises, especially in the good old US of A (where the Federal Government is now running a substantial routine structural deficit). So I guess gold, silver and the rest are a somewhat not correlated hedge against that, although, let’s be honest, gold is basically another risk on asset (like equities or crypto) but with a weirdly unpredictable (sometimes it shows up, and sometimes it doesn’t) crisis alpha overlay.
Interesting article.
I stuck 15% of my portfolio in Gold about 6-7 years ago (thank you Portfolio Charts!) and it’s price is up nearly x3. I’ve since been snipping little portions off after each big price rise and diversifying my diversifier. BHMG & individual linkers all free because of Gold. I’m down to 7% and that feels right. It’s just some of the profit I could lose.
Mind you, that last chart… Are we about to see a regime change?
10% @TA? That’s pretty hefty! I do like your gold drawdown plot though – it reminds me of the Met Office temperature plots that are criticised by certain folks because of the colour scale for temps > 20 C.
I hold (not much) physical gold so that I can shave bits of it off for food once the End of Times gets close. (Don’t tell anyone.)
@DH – “You don’t, as such, grow your wealth in gold.” I bought in because you can reduce your downside risk with gold. You can diversify with gold. You can hedge against other assets going down the tubes in gold. That’s about as far as I’d want to push it.
I think gold is an interesting case study in anchor points. An observer who anchors on the last 20 years may think gold is amazing. An observer who anchors on the 80s or 90s may think gold isn’t worth it.
I don’t think a risk on / risk off framework explains gold. 1980s and 1990s were the golden years for equities but not gold. Gold is essentially uncorrelated with equities. I like your crisis overlay idea.
@Brod – Portfolio Charts did you right. I hemmed and hawed about gold for ages but finally got in a couple of years ago.
@Pendle Witch – 5% doesn’t make enough difference. 10% could keep me in iron rations for a fair few years during the Times of Darkness 🙂
A few points worth clarifying in the discussion around gold:
1. “Barbarous relic” referred to the gold standard — not gold itself.
John Maynard Keynes did not call gold a barbarous relic. In A Tract on Monetary Reform (1923) he wrote: “In truth, the gold standard is already a barbarous relic.” He was criticising the monetary system, not the metal.
2. Buffett’s dismissal of gold partly reflects his intellectual lineage.
Warren Buffett’s views on gold largely come through the value-investing tradition of his mentor Benjamin Graham. During much of Graham’s life (1933–1974), Americans were actually prohibited from owning monetary gold, which naturally shaped the investment frameworks being taught at the time.
3. Buffett’s father held a very different view.
Howard Buffett, a U.S. Congressman and Warren Buffett’s father, was a strong supporter of sound money. In 1948 he warned that abandoning gold would remove a key restraint on government spending, arguing that redeemable money in gold acted as a “watchdog” against unlimited public spending.
4. The 1979–1981 precedent often cited against gold cannot easily repeat today. Gold’s collapse after 1980 was largely due to Paul Volcker raising U.S. interest rates to nearly 20% to crush inflation. Real rates became sharply positive and the dollar surged. That policy worked because public and private debt levels were far lower than today. With current global debt levels, a Volcker-style rate shock would likely destabilise the financial system, making such a policy extremely difficult to repeat.
@The Accumulator – I think that’s broadly right, but it slightly undersells gold. As Lyn Alden often points out, gold isn’t a productive asset like equities, so it doesn’t grow wealth through earnings. But it can grow purchasing power in certain monetary regimes, particularly when real interest rates are negative and currencies are being debased. So its role isn’t just downside protection. It’s more accurate to think of gold as a monetary asset and portfolio diversifier that tends to perform in periods when financial assets struggle or when real yields fall.
@TA #6: the timings as always with every asset class are everything. Commodities also went gangbusters 1974-80, equities not so much. Roles then reversed 1994-1999 and 2008/9-2020/21.
I’d humbly suggest first deciding the gold fraction / % that you might want to target within your portfolio.
That could perhaps be 5% or 10%, for a ‘balanced’ portfolio, or as much as 25%, for a ‘full on’, 1970-82 vintage, Harry Browne Permanent Portfolio:
https://monevator.com/the-permanent-portfolio/
Then buy that chosen allocation when the Gold/ DJIA ratio rises above 15 (gold becoming cheaper relative to equities) and sell it (for equities) when it falls below 5 (gold becoming expensive compared to shares).
The ratio went as low as 1.29 in 1980 and as high as 44 in 2000.
You could say that’s market timing, but I’d say it was rules based investment.
@paul musgrove #7 & 8: all excellent points which I agree with.
I hadn’t realised that JMK was condemning the gold standard, and not the metal per se. A vital but often overlooked (or underappreciated) distinction.
To go back on the gold standard now using central bank declared holdings would require a price of over $20,000 per Troy ounce.
I do remember that Buffett quote from his 2011 investors’ letter about all the world’s above ground gold (then about 170,000 tonnes) forming a cube of 67 foot dimensions, which would comfortably fit between the four legs of the Eiffel Tower.
That should be the DJIA/Gold ratio, not the Gold/DJIA ratio.
@DH The “$20,000 gold” claim assumes 100% backing of the entire money supply, which isn’t how historical gold standards worked. Gold mainly anchored the monetary base and settled imbalances, while bank credit expanded on top of it. Pre-WWI United Kingdom, the Bank of England maintained convertibility with only partial gold reserves — confidence, not full backing, mattered. As Lyn Alden notes, the required gold price depends on what portion of the monetary base you want covered, not all money. And 1980s gold collapse relied on Volcker’s extreme real rates, impossible to replicate today.
Functional gold standards don’t need $20k gold — just credible convertibility and enough reserves to maintain trust.
Thanks for this overview TA.
To slightly echo Paul Musgrove, I think the 1980-1999 collapse is interesting when reflected via Volcker and the level of interest rates.
Firstly, Gold is less appealing if you can get 10-12% from a Bond.
Secondly, the early 80s were near the bottom for the stockmarket – as it recovered, you’d expect people to sell out of the protective asset to buy cheap equities.
I think the argument for gold at the moment is currency debasement and political instability – I very much hope that these both get solved soon, and gold will not be so necessary.
I cut a section about the drivers of the gold price out of this piece because it deserves its own article and this one was getting too long. I’ll paste the bullet points in below because it’s relevant.
Theories abound as to what drives the gold price:
– Falling real yields
– Emerging Market central bankers (shadow currency)
– Financialisation via ETFs
– Geopolitical tension
– Erosion of trust in the global financial system
– Demand for bling
– Hedge against LARPing in the Mad Max universe
The reason I showed the mega drawdown chart is because I think it’s important to show the good, the bad and the ugly of any investment we talk about on Monevator.
So if I present the reasons why you might want to hold an asset, I think its incumbent upon me to show – somewhere on the site – what bad looks like.
I’ve done this for all the major assets, I think, except cash – and that’s coming 🙂
20-year bear markets (and worse) can and have marred the record of every asset. The underlying causes change but it’s unwise to suggest that such an outcome can’t happen again. History doesn’t repeat but it rhymes as they say.
I don’t think these events are an argument against holding a particular asset. They’re an argument for diversification. They’re an argument against pinning all your hopes on any one thing (or even any two things) to deliver on schedule.
The real yield theory is super interesting but it’s not the only factor at work. If it was then gold wouldn’t be so hot right now.
Apparently robberies of possible gold holding households in Leicester is an actual thing according to my friend who lives there.
@KayD – yes, robberies of South Asian households are common given the volume of 22ct gold available.
@The Accumulator #13
Look forward to that one. As touched on in previous articles, if mean reversion is a thing, it can be very long wait for it to happen and the mean is of course a dynamic target. The reasons for Gold’s renaissance are many as you’ve mentioned, but I think you’ve missed the most salient: fiscal dominance.
It’s clear in that what were once previously hard currency countries, both political leaders and voters have now thrown in the towel with regards to fiscal deficits. It’s print and be damned. Holding fiat is probably the riskiest position to be in.
@Vic – cheers! I chucked the debt burdens into my ‘Erosion of trust in financial system’ bucket but I think you’re right to spotlight it. It seems likely a big part of the story since GFC. Totally agree on reversion to the mean.
@B – Does awareness of the gold price translate into a different cultural perspective on gold as an investment do you think?
Nice article. A good bit of confirmation bias for me.
I went initially by Fintwit narrative (and the many marvellous people I discovered from there) to go eventually ~ 15% into Gold (+a bit of Silver) due to the March 2020 event, and then the early 2022 Russian sanctions/confiscation thing.
I do keep adjusting my allocation target instead of re-balancing, but am trying to keep it to no more than 25% now (not including the GDX + special situation miners I have).
Wondering whether I should actually just let my Gold/Cash allocation float – Been listening to Rick Rule recently saying he uses Gold + Cash as a savings vehicle for when he finds something else of value to buy (e.g. depressed natural resource stocks usually in his case!)
I also read a lot of Jim Rickards in 2020/2021 on the history of Fiat & Gold; and from him found a good novel on the collapse of Fiat + the importance of having something that retains value (Lionel Shriver – The Mandibles).
Dominic Frisby’s recently published ‘The Secret History of Gold’ is also a good read BTW.
It would be wonderful to have that Gold + Global Equities return stacked (100/100) capital efficient ETF available in the UK. Go with Winton Trend Enhanced Global Equity (TF stacked with global equities 100/100) and WisdomTree’s WGEC ETF (90 global equities / 60 global HQ gov bonds hedged to Sterling). Wasn’t the FSA meant to be reporting (following consultation) on the possibility of allowing US listed ETFs in ISAs and SIPPs? That’s gone very quiet. TF/ Gold/ Bonds/ Global Equities is a cracking combo. 60% (20 each limb) into that plus 20% commodo, 10% infra, 5% global macro HF and defensive IT (BHMG + RICA) and 5% misc would be close to my ideal equilibrium allocation. Bit high on leverage (1.5x overall) but would be a relatively safer execution of it IMHO.
Obv’s (re above) YMMV (and almost certainly will vary), I know nothing (I’m just another random ranter on the internet), and the above is just my personal opinion, which may change in a moment (and sometimes does), and is in no way whatsoever a recommendation, much less still advice.
@DH – Please don’t worry. You are obviously a random ranter on the internet. That’s a joke, but honestly I think it’s OK for people to comment about funds they like without having to worry about the FCA heavies coming round.
An interesting read, thank you. And a timely reminder that as I get a bit older, I should perhaps be diversifying away from VLS, VFEG & VEVE. Which does beg the question, what’s the most cost effective way to hold a small ish amount of gold, or exposure to the gold price rather than the physical metal?
Thanks.
I really enjoyed reading this excellent post. Thanks TA! Specifically the emphasis on the diversification and volatility-reducing consequences of adding gold to a portfolio.
I started adding physical gold to my portfolio back in 2016 when I compared a 100% S&P tracker portfolio starting just before the Tech Crash and a portfolio with 60% S&P 15% gold and 25% short bonds for an initial withdrawal rate of 3%.
A decade since then, I’ve been keeping an allocation to gold that started around 10%, then went up to 15%, stayed around 20% for a long time before jumping to 32% half a year ago until I reduced it again back to 25%. Over this decade, my annualised long term average return has always been around 12% (it is 13.2% now) and the annualised volatility has always been below 6% (it is 5.33% now). Having a low volatility is really important to reduce the sequence of returns risk when drawing down from a portfolio. I’m still working and plan to keep working indefinitely, but it is always good to have the option to stop if circumstances change unexpectedly. Right now my portfolio has the following allocation:
* 55% equities (30% large value, 25% market average, 10% small value, 10% small market average, 5% small growth, and 20% large growth) with P/E=14.7, P/Book=1.9, and P/Sales=1.4
* 15% bonds (a short ladder of inflation linked gilts and an ultrashort investment grade etf ERNS)
* 25% Physical gold ETC
* 5% cash.
I’m planning to keep the gold allocation at around 25% (or perhaps even just 20%) from now on, so I will probably have to keep selling gold to buy equities and inflation linked bonds, if the geopolitical climate doesn’t cool down soon.
Another goldbug here – thanks very much for the article (and all the reader comments).
I’m a long term holder of gold funds and precious metal etf’s, having first been alerted to them back in 1999 when i overheard a couple of ‘rocket scientist’ colleagues standing by the photocopier discussing the merits of investing in gold. Thanks very much chaps!
Very recently, i’ve been drawn towards the allure of holding physical gold bullion, specifically Britannia and Sovereign coins. For me, these would add further diversification to a mature and reasonably well spread portfolio. Also, as these coins are (currently) Capital Gains Tax free they would hopefully offer some ongoing shelter from the ever tightening Government tax grab. For anyone who has utilised all their tax wrappers, investing a bit of long term surplus in some bullion might have some merit.
There’s obviously associated buying and selling spreads – say ~5% at both ends (ouch!), assuming you can even find a willing buyer in the future, the aggro of storage concerns and costs, Government confiscation in extreme circumstances, plus fakes in circulation especially for the older coins. So plenty of potential downsides. On the other hand, the money printing continues to erode the value of our currency, fiat currency collapse is a discussion topic in certain circles, the digital currency conspiracy theorists fear we’ll all be back on ration books before too long, and just how robust will all the precious metal etf’s (physical and synthetic) turn out to be in the event of a ‘force majeure’ etc.
I’m still mulling over my gameplan in this regard, but as someone who entered retirement towards the end of covid, in hindsight i’m now wishing i’d paid a bit more attention to the art of coin collecting in the latter years of my career and set up a monthly purchase plan a decade ago for the odd ounce of shiny stuff here and there.
@Bob – a physical gold ETC (as mentioned by @Tom-BDW) – you can just buy and sell through any normal broker. There’s a few gold options listed here: https://monevator.com/low-cost-index-trackers/
@Tom-BDW – Cheers! So gold is now your main diversifying asset? I think you’re the first Monevator reader I’ve read who’s mentioned that. Essentially you’ve got a Golden Butterfly portfolio minus the long bonds?
I’m just working out the withdrawals for the No Cat Food portfolio (Monevator’s model decumulation portfolio) and the rebalancing rules mean most of this year’s income is funded by the rise of gold. Kind of amazing but I’m wincing as I cut it back – always hard to trim a winner 🙂
Incidentally, did you see two episodes of the Dalek Masterplan have been recovered? William-HDW is delighted.
Another goldbug here – thanks very much for the article (and all the reader comments).
I’m a long term holder of gold funds and precious metal etf’s, having first been alerted to them back in 1999 when i overheard a couple of ‘rocket scientist’ colleagues standing by the photocopier discussing the merits of investing in gold. Thanks very much chaps!
Very recently, i’ve been drawn towards the allure of holding physical gold bullion, specifically Britannia and Sovereign coins. For me, these would add further diversification to a mature and reasonably well spread portfolio. Also, as these coins are (currently) Capital Gains Tax free they would hopefully offer some ongoing shelter from the ever tightening Government tax grab. For anyone who has utilised all their tax wrappers, investing a bit of long term surplus in some bullion might have some merit.
There’s obviously associated buying and selling spreads – say ~5% at both ends (ouch!), assuming you can even find a willing buyer in the future, the aggro of storage concerns and costs, Government confiscation in extreme circumstances, plus fakes in circulation especially for the older coins. So plenty of potential downsides. On the other hand, the money printing continues to erode the value of our currency, fiat currency collapse is a discussion topic in certain circles, the digital currency conspiracy theorists fear we’ll all be back on ration books before too long, and just how robust will all the precious metal etf’s (physical and synthetic) turn out to be in the event of a ‘force majeure’ etc.
I’m still mulling over my gameplan in this regard, but as someone who entered retirement towards the end of covid, in hindsight i’m now wishing i’d paid a bit more attention to the art of coin collecting in the latter years of my career and set up a monthly purchase plan a decade ago for the odd ounce of shiny stuff here and there.
@TA (#26) – Yes, I’m looking forward to watching them on the iPlayer on the 4th of April! Peter Purves said ‘My flabber has never been so gasted.’
My portfolio is more like the permanent portfolio (25% gold) with more equities (55%) and no long maturity bonds (20% short maturity bonds and cash).
I have never been entirely passive. I do not pick shares, just stick to index funds, but I have always skewed my portfolio towards value and a more equal weighted geographical diversification. I have also always tried to pay attention to which way the wind is blowing. It seems to me that it is unlikely that bonds will offer much downside protection in the current environment. So I am only holding bonds for liquidity and unexpected inflation protection: a short ladder of inflation-linked gilts and an ultra short investment grade bond fund to complement the cash. No intermediate or long maturity bonds.
While I have gold ETFs, I also think it is worth owning some physical gold and silver as well for more extreme outcomes. Investment accounts can and have been confiscated/revalued by governments, so physical is about the only version where you remove all the counter party risk (other than being robbed at home etc). Physical may get you across a border, on that boat, or help you restart life in another country – it’s much harder to bribe a border guard if they are concerned about leaving a paper/electronic trail.
Also worth mentioning central banks have been buying up gold as a reserve currency as they have been spooked by confiscation of US dollars and realisation that US controls almost everything that happens in US dollars – this may also partly explain the recent outperformance.
Also, i heard that mining stocks are like gold but on steroids, so I have a bit of that as well, but appreciate it is higher risk
@Kid and AVB – Thank you for the discussion on coins – it’s interesting to hear your thoughts. The tail-risk scenarios are always worth bearing in mind. Where I live, I think the balance of risks skews more towards being burgled than making it over the border. A neighbour of mine had their safe ripped out of their wall a couple of years ago. I guess you take out insurance to cover off that scenario?
@AVB – There’s a piece here on gold miners performance going back to 1963. It’s a membership post but… https://monevator.com/gold-miners/
@Tom-BDW – Yes, the Peter Purves quotes were quite moving. Interesting to hear that it was just a job to him at the time. Makes sense. Can’t believe how old he is. I used to watch him on Blue Peter!
I hear you on bonds. I still have intermediates but a lower percentage now than pre-Covid. I decreased my holding before 2022 but the remainder still got hit hard. Sold more since then to fund better diversification on the defensive side.
Over the last 2 weeks its been interesting seeing how different asset classes have been affected by the Iran war:
Gold has actually dropped, by 1%, despite the situation seeming pretty crisis-y to me.
Commodity futures have shot up (CMFP +10%). Unsurprising given what’s happening to oil prices
Short duration linkers are up (T28 +1%), while same duration nominal gilts are down the same amount (TN28 -0.8%). Long duration gilts are down hard. Clearly the market is expecting inflation.
Global equities down 3%
Commodities are doing a stellar job in my portfolio right now. 15% allocation to CMFP has pretty much cancelled the losses in the other assets. Thanks so much @TA for your excellent series 3 years ago putting me on to commodities – commodities-investing
I have 8% in gold currently, all in ETCs. I have been wondering recently how robust these would be in a serious financial crisis, compared to the likes of BullionVault, which promises fully allocated gold. I have read many disparaging comments about ETCs being ‘paper gold’, but from my reading of various ETC prospectus’s, for each £1 of money in the fund, I think they have pretty close to £1 of gold in a vault. ‘Metal entitlement’ is usually specified in the fund key facts, and making some educated guesses as to what exactly this means (why does no-one specify units!??), I calculate within a few % of 100% allocation for SGLP, SGLN, & GLDA. Invesco SGLP is the only one I’ve seen that makes a reasonably clear statement: “The ETC will use a ‘swing bar’ approach, whereby gold bullion equal to at least the full value of the certificates will be held in an allocated account in the name of the issuer.”. Does anyone know otherwise about ETCs holding physical gold approximately equal to the total fund value?
Yes, I have always had gold in my portfolio via physical gold etfs. Partly from an investment angle, because I have a suspicion that gold is the only true sort of money and that the UK government will try to deal with its overborrowing by debasing the pound. Partly because it is a form of insurance which responds well to disasters and there are a lot of those looming on the horizon.
@Eadweard #31: very useful on CMFP. Amazingly, it’s actually available to buy on the likes of AJ Bell and HL. Do you think that this is better than UC15, in respect of which see @TA on ‘Which Commo ETF’ here?:
https://monevator.com/best-commodities-etf/
Thanks TA, and others. I’ll investigate.
@Eadweard – Cheers! About the only reassuring thing about the latest escapade is it shows that commodity ETFs do work. They’re meant to respond like the fire brigade when there’s a supply shock and they just have. UC15 is doing well for me right now, too.
I’m not sure if it meets your criteria but your description put me in mind of SGBS – WisdomTree Physical Swiss Gold:
https://www.wisdomtree.eu/en-gb/products/ucits-etfs-unleveraged-etps/commodities/wisdomtree-physical-swiss-gold
They quote metal entitlement in fine troy oz and seem keen to demonstrate their bona fides.
@DH – CMFP was my alternative pick 🙂 There’s very little now between CMFP and UC15 since launch. CMFP has narrowed the gap over the last few years. The article has a couple of snippets about how their different index methodologies are meant to respond to economic conditions.
I can see from comparing various contenders over different timeframes that different indexes have their time in the sun. Plain old first-gen BCOM ETFs have done just fine over the last few years too.
Thanks TA for the fund suggestion, but I wasn’t particularly looking for a different fund. I figure all gold ETCs are pretty similar (certainly their prospectus documents all say the same sorts of things), and I am mainly interested in whether there is really a substantive difference between gold ETCs and the likes of BullionVault. I suspect there isn’t much difference (aside from the fact you can’t hold BullionVault in an ISA, which is a major negative).
@DH, I did not choose CMFP for any strong reason. Just it was on TA’s shortlist, and was available from iWeb, whereas UC15 was not (and still isn’t).
@Delta Hedge 20 – the issue was PRIIPS required US ETFs to have a KID (which they didn’t bother to do).
The PRIIPS rules are actually being replaced by the Consumer Composite Investment (CCI) rules in the UK, which I think is due to start taking effect in the new tax year (but it will take another year or so to come fully into force).
I’ve not read enough about the legislation to know if this will actually mean the US ETF issue goes away – but it sounds like it will give a lot more leeway as to how disclosures are put together.