The Case for Gold in Crises
Gold and the COVID-19 Crisis
The year 2020 was marked by the global COVID-19 pandemic. As with past crises, gold provided a safe haven investment compared to more traditional asset classes, like stocks and bonds. In 2020, gold delivered strong relative performance gaining 25.12%, compared to 8.00% for bonds and 18.40% for stocks.1
Gold Has Provided Portfolio Protection During Major Crises
Gold vs. Stocks and Bonds
During the six crisis periods since 2007, gold has proven its value as a safe haven asset. On average, for the six periods, gold bullion has returned 13.45% compared to -15.68% for the S&P 500 Total Return Index and 6.31% for U.S. Treasuries (as of 12/31/2020).
Bar Chart: Performance of Gold Bullion vs. S&P 500 Total Return Index and U.S. Treasuries in “Crisis” Periods (2007-December 31, 2020)
Source: Sprott Asset Management. Data as of 12/31/2020.2
Table: Performance of Gold Bullion vs. S&P 500 Total Return Index and U.S. Treasuries in “Crisis” Periods (2007-December 31, 2020)
|Crisis Period||Start||End||S&P 500 TR Index||U.S. Treasuries||Gold Bullion|
|2008 Global Financial Crisis||10/11/2007||3/6/2009||-54.46%||15.80%||25.61%|
|2010 Euro Zone Crisis/Flash Crash||4/20/2010||7/1/2010||-14.53%||4.47%||5.44%|
|2011 U.S. Sovereign Debt Downgrade||7/25/2011||8/9/2011||-12.27%||3.64%||7.86%|
|2015 China Yuan Devaluation||8/18/2015||2/11/2016||-11.85%||3.50%||11.54%|
|2018 Fed Hike/U.S. China Trade War||9/20/2018||12/24/2018||-19.34%||2.45%||5.14%|
|2020 COVID-19 Pandemic||12/31/2019||12/31/2020||18.40%||8.00%||25.12%|
Source: Sprott Asset Management. Data as of 12/31/2020.2
Golden Bulls, How Gold Performs
Gold has always been a store of value, but there are periods when the growth has been explosive.
1 Spot gold performance is measured by the Bloomberg GOLDS Comdty Index; stocks are measured by the S&P 500 TR Index; bonds/U.S. Treasuries are measured by Bloomberg Barclays US Treasury Total Return Unhedged USD Index (LUATTRUU).
2 Global Financial Crisis: 10/11/2007-3/6/2009; Eurozone Crisis: 4/20/2010-7/1/2010; U.S. Sovereign Debt Downgrade: 7/25/2011-8/9/2011; China Yuan Devaluation: 8/18/2015-2/11/2016; Fed Rate Hike & China Trade War: 9/20/2018-12/24/2018; COVID-19 Pandemic: 12/31/2019-12/31/2020. S&P 500 TR Index is measured by the SPXTR; U.S. Treasuries are measured by Bloomberg Barclays US Treasury Total Return Unhedged USD Index (LUATTRUU); and spot gold performance is measured by the Bloomberg GOLDS Comdty Index.
Past performance is no guarantee of future results. You cannot invest directly in an index. Investments, commentary and statements are that of the author and may not be reflective of investments and commentary in other strategies managed by Sprott Asset Management USA, Inc., Sprott Asset Management LP, Sprott Inc., or any other Sprott entity or affiliate. Opinions expressed in this commentary are those of the author and may vary widely from opinions of other Sprott affiliated Portfolio Managers or investment professionals.
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