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.
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