Like most market-based investments, the price of gold swings in all directions. So how has he fared over the past ten years? If you invested $1,000 in gold ten years ago, how much would it be worth today?
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What $1,000 worth of gold looked like 10 years ago today
Ten years ago, the price of gold was $1,246 per ounce. Today it is worth $2,350.65 per ounce. This represents an increase in value of 88.66%, or an average annual return of 8.86% (not calculated for compounding).
If you had invested $1,000 in gold ten years ago, it would be worth $1,886.56 today. It’s not a bad return. But how does this compare to, say, investing in stocks?
The S&P 500 is up 174.05% over the past ten years, for an average annual return of 17.41%. And that says nothing about its dividend yield over this period.
Also consider that, as volatile as the S&P 500 is, gold returns have varied even more throughout modern history.
The uneven history of gold
When Richard Nixon separated the dollar from gold in 1971, the price of gold suddenly began to float at market rates. It then skyrocketed through the remainder of the 1970s, delivering an average annual return of 40.2%. Then the 1980s hit and the gold party came to a screeching halt. From 1980 to the end of 2023, gold recorded an average annual return of just 4.4%. Gold has lost its value in most years, for example in the 1990s.
Gold doesn’t work like other investments. Traditional investments like stocks and real estate work because they generate income. Investors measure this income, assess the likelihood of future income growth, and assign a value to the investment based on it.
Gold does not produce income. In fact, it doesn’t “do” anything. It stays there and looks pretty. Which may not mean much when the rest of the economy is operating healthily, but it can become very significant when something goes wrong.
Why investors are turning to gold
Many investors consider gold to be the ultimate safe haven. When “the world is going to hell in the handbasket,” investors turn to gold.
For what? Precisely because it has been used as a store of value for millennia.
Investors value gold as a hedge against geopolitical uncertainty. If global markets and supply chains look likely to be disrupted, investors flock to gold. In 2020, for example, gold surged 24.43%.
Similarly, investors turn to gold when fiat currencies rapidly lose value due to inflation. Amid all the inflationary anxiety in 2023, gold rose 13.08%.
Finally, gold provides a non-correlated hedge against stock market crashes. In other words, gold offers diversification: a collapse in financial markets does not lead to a collapse in gold prices. Quite the contrary: many investors believe that the price of gold will increase in a bear market.
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So, is gold a “good” investment? It’s a defensive investment. Don’t expect it to generate the same returns as stocks or real estate, or to provide cash flow. But when the zombie apocalypse comes, gold will have value, even if no other investment does.
This article originally appeared on GOBankingRates.com: If You Invested $1,000 in Gold 10 Years Ago, Here’s How Much Money You’d Have Today.
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