Gold: A century of returns, risks, and relevance

Gold is nearing $3,000 per ounce in 2025, driven by fears of slowing U.S. growth, rising geopolitical tensions, and widening fiscal deficits. This surge has coincided with a correction in equity markets, reigniting interest in gold as a portfolio diversifier.

But before rushing to add gold to your portfolio, it’s worth stepping back to examine its history, risks, and role in long-term investing.

Gold’s Performance: A Century in Review

Gold’s journey from $20.68 per ounce in 1920 to nearly $3,000 in 2025 is nothing short of remarkable. Here's a performance breakdown:

— Starting Price (1920): $20.68
— Current Price (2025): $2,983.65
— Total Return: +14,328%

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— Annualized Return (CAGR): 4.85%

The most significant price movements began after 1971, when the U.S. abandoned the gold standard. Since then, gold has delivered an impressive annualized return of 8.42% in USD. However, as the chart shows, this journey has been far from smooth, marked by periods of both sharp rallies and extended drawdowns.

The Dark Side: Drawdowns and Volatility

Gold’s drawdowns reveal its inherent risks. While it serves as a hedge during crises, it is far from a risk-free asset:

• Longest Bear Market: Between 1980 and 2000, gold lost 61.3% of its value over 20.5 years.

• Other Drawdowns: -36.9% over 1.5 years and -40.1% over six years highlight its susceptibility to steep corrections.
  

Unlike equities that often recover within years, gold’s recovery periods can span decades. This extended timeline makes it challenging for