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Gold has remained a favorite of portfolio managers, central bankers as well as consumers over decades.
Key aspects -
- Historically Gold has remained an excellent hedge against inflation. One ounce of Gold will by one the same best Armani suit today, that it would have 25 years ago. Naturally it's being used and kept as a store of value.
- Gold is also an excellent bet in turbulent times and sometimes a good hedge against other asset class.
- Rise of silver and platinum, failed to replace higher demand for gold in gems and jewelry business.
However, historical analysis of gold shows, in spite of being quoted in dollar the relationship is not symmetrical.
Analytics -
- Gold tend to rise more over dollar weakness than fall while period of strength.
- Historically speaking, since 1973 gold generated average annual return of 14.9% when USD weakened compared to average fall of -6.5%, during period of dollar strength.
- Gold rose average 7.8% per annum while dollar remained flat.
- However to the surprise, correlation with other asset class is historically quite low below 17%. During weakness of US dollar, equities and gold show minor but positive correlation.
- Volatility has historically been high, averaging 19.5% per annum.
