The Case for Gold in Crises
Gold Has Been a Safe Haven During Economic and Political Instability
The current geopolitical and economic crisis began in early 2022 with Russia's invasion of Ukraine, and has continued into 2023, with the Q1 U.S. banking crisis. Throughout, markets have been adversely impacted by rising interest rates and stubborn, higher-than expected inflation. As with past crises, gold has provided a safe haven investment compared to more traditional asset classes, like stocks and bonds, as shown in the table below.
Gold vs. Stocks and Bonds
During the seven crisis periods since 2007, gold has proven its value as a safe haven asset. On average, for the seven periods, gold bullion has returned 12.02% compared to -13.78% for the S&P 500 Total Return Index and 4.45% for U.S. Treasuries (as of 3/31/2023).
Table: Performance of Gold Bullion vs. S&P 500 Total Return Index and U.S. Treasuries in “Crisis” Periods
Bar Chart: Performance of Gold Bullion vs. S&P 500 Total Return Index and U.S. Treasuries in “Crisis” Periods
Source: Sprott Asset Management. Data as of 3/31/2023.2
Data as of 3/31/2023. The beginning and ending periods selected are our best estimate of the highest impact periods of each crisis and does not necessarily indicate the exact beginning or ending of the specific crisis event. This information is presented for illustrative purposes only. Data as of 3/31/2023. Source: Sprott Asset Management, Bloomberg. Dates used: 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; Russia-Ukraine War & Banking Crisis: 2/24/2022-3/31/2023. S&P 500 TR Index is measured by the SPXTR; U.S. Treasuries are measured by Bloomberg Barclays US Treasury Total Return Unhedged USD (LUATTRUU); and Gold Bullion is measured by spot gold (Bloomberg GOLDS Comdty).
†The Trusts are closed-end funds established under the laws of the Province of Ontario in Canada and are available to U.S. investors by way of listings on the NYSE Arca pursuant to the U.S. Securities Exchange Act of 1934. The Trusts are not registered as investment companies under the U.S. Investment Company Act of 1940.
††SESG is a U.S. registered exchange traded fund established pursuant to the U.S. Securities Act of 1933 and is listed on the NYSE Arca.
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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