Gold's Real Return - Greater than you Thought

[LawrenceChard]

Latest World Gold Council Report (e-mail)

 

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Gold's real return - greater than you thought   While gold’s contribution to managing portfolio risk is well established, its contribution to portfolio return is not.   Our analysis shows that the gold price over long horizons is mainly driven by an economic component coupled with a financial component that balances the overall relationship.   This simple yet robust approach – which we refer to as GLTER – uses the distribution of above-ground gold stocks analysed via different demand categories as a foundation and starting point.   And it suggests that gold’s return is not only well above inflation over the long run but more closely linked to global GDP than previously understood.    https://www.gold.org/goldhub/research/golds-long-term-expected-return? Worth reading! 😎

[Bratnia]

UK data since 1896.

Pre 1915 (up to WW1) and gold/Pound were linked, depositing gold/silver received interest ... more gold (silver). During WW1 the coupling was separated.

For a investor who yearly rebalanced equal amounts into UK stocks, US stocks, gold, silver (with above caveat pre 1915) and drew 3.33% of the portfolio at the start for spending, and where that withdrawal amount was uplifted by inflation as the amount drawn at the start of subsequent years for spending ... then after 30 years they would have had their inflation adjusted money returned (via 30 yearly installments).

30 years is the typical figure used as that reflects a 65 year old retiree living to age 95.

Calendar year granularity and measuring all start years for 30 year runs and in 70% of cases they ended with 100% or more of the inflation adjusted portfolio value still available. Had their money returned via yearly installments, ended with their money still available, have cake and eat it.

In the median average case they ended with 1.5 times more (inflation adjusted) than at the start.

86% chance of having ended with at least 50% (inflation adjusted) remaining.

In the worst case ended with 15% (inflation adjusted) remaining.

In the best case ended with over 5 times more than the inflation adjusted start date portfolio value remaining.

So in the median case, had their inflation adjusted money returned via yearly installments and ended with 1.5 times more than their inflation adjusted start date portfolio value. Eat cake and have even more cake.