Visualizing the Economic Case for Gold

Throughout history, people have revered gold as a sign of wealth and a store of value. Today, gold is not only a precious metal but also a precious investment.

In fact, in 2020, 47% of global gold demand—the largest share—came from investors.

Today’s infographic from Kalo Gold outlines the economic case for gold and highlights some of the main reasons why investors are attracted to it.

Gold as an Investment: A Shield for All Financial Conditions

Gold can protect investors’ wealth during tough times while preserving capital for the long run. Investors add gold to their portfolios because it offers many investment benefits:

• Effective diversification

  In a typical portfolio of stocks and bonds, gold’s historically low correlation with major asset classes and negative correlation with the U.S. dollar can reduce risk through diversification.

• Hedge against inflation

  Gold is priced in U.S. dollars. Therefore, as the purchasing power of the dollar falls due to inflation, gold becomes more expensive to buy, acting as a hedge against the eroding value of the dollar.

• Long-term returns

  Gold has always maintained its value in the long run. Between 2001 and 2020, gold’s annual return averaged 11.2%, outperforming other key asset classes including U.S. equities, bonds, and treasuries.

Additionally, gold’s low correlation with other assets allows it to outperform during recessionary periods, reducing the downside of stock market downturns. In fact, gold delivered positive returns during the recessions in (Read more...)