The World Gold Council has published a report titled “Long-Term Return Expectations of Gold.”
The report states that the contributions of gold in managing portfolio risk and its value preservation characteristics have been well established and supported by numerous studies.
However, it indicates that the contribution of gold to portfolio returns has not been clearly defined. The report notes, “There are frameworks for predicting the long-term returns of gold, but these are far from being robust approaches consistent with capital market assumptions for other asset classes.”
“THE ‘VALUE STORAGE VEHICLE’ APPROACH TO GOLD HAS ITS SHORTCOMINGS”
The report mentions that research into the expected returns of gold describes this commodity as a “value storage vehicle,” emphasizing that this approach has certain deficiencies.
It evaluates that using data from periods when the “gold standard” was in place can lead to misleading conclusions about gold’s performance, and also notes that looking solely at demand from financial markets can result in the misconception that gold holds a lesser weight in portfolios.
“GOLD HAS OUTPERFORMED INFLATION OVER THE LAST 50 YEARS”
The report showcases a new approach to calculating gold’s long-term returns, demonstrating that gold has significantly outperformed inflation over the last 50 years while providing returns that align with global GDP.
It emphasizes that the sectors supporting gold purchases, including jewelry and technology, central banks, financial investments, retail bullion, and coins, are much greater than current theories suggest. Additionally, the report states, “While financial market investors tend to dictate price formation in the short term, they are less dominant in the long term.”
Source
Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
