Gold’s 10-Yr return less than 2%, Global demand down by 60%
During risky market conditions, investors want high-quality assets that can protect their wealth and limit losses. Gold has shown to be a reliable store of value in difficult times. But the 10-year return on gold investments fell far short of forecasts.
After going negative in August, gold's 10-year return recovered to slightly under 2% this week, according to Block Arabia statistics.
Gold has been the ultimate stock market hedge for the previous 50 years, peaking in the 1970s and 2000s. From 2000 through 2009, the S&P 500 returned just over 1% annually, the poorest decade since the 1930s. Throughout the decade, gold investment returned 18% per year.
The St. Louis Fed reported favourable returns on gold investments over the coming decade. Gold returned 25.6 percent in 2002. Five years later, it was nearly 32%. After a great 2009 and 2010, the precious metal investment return sank to -27 percent in 2013.
In 2017, the annual investment return increased to 12.7%. Finally, in 2020, gold surpassed silver as the second-highest annual investment return, averaging about 25%, far more than US equities, corporate bonds, or EAFE stocks.
However, data shows that gold's YTD investment return fell to -7.37 percent in 2021. While the precious metal's 3- and 5-year returns remained strong this week at 46% and 31%, the 10-year return has fallen dramatically in recent months. On August 10, it was -6.56 percent, and in early September it was -7.54 percent. This statistic managed to attain 1.97 percent on October 4th.
Gold is seen as a ‘safe haven' in times of market instability, like the COVID-19. That's why global gold demand soared last year.
Before the COVID-19, worldwide investment gold demand averaged 300 metric tonnes per quarter in 2019. By March 2020, this had risen to 556 metric tonnes. The trend continued in the second quarter, with global demand for investment gold reaching over 584 metric tonnes, nearly double the previous year's quarter.
According to the World Gold Council, worldwide investment demand for gold set a record high of 1,140 metric tonnes in the first half of 2020.
However, the following months saw a considerable decline, with Q4 2020 seeing 138 metric tonnes. Despite a rebound in worldwide investment gold demand in the first half of 2021, it is still 60% below the same period last year.