Gold – A Hedge for All Seasons?
February 2018
By Joe Foster, Portfolio Manager and Strategist
Gold is recognized as a hedge against financial stress and tends to outperform other investments in severe market downturns.
In a June 2017 report1, ETF Securities looked at gold’s performance during drawdowns of over 15% in the S&P 500. Since 1982 there have been ten such S&P drawdowns that averaged -24.4%. The corresponding average performance of gold was +7.2%.
Equity Drawdowns Over 15%: 1982 - 2017
Source: ETF Securities – Bloomberg & ETF Securities. Data 08/25/87 – 10/03/11 * S&P 500 Price Return
A 2011 bulletin2 by Lombard Odier looked at gold real returns in major global banking crises since the Great Depression. They found five banking crises lasting from 12 to 57 months during which the real performance of gold averaged +20.6%.
About the Author:
Joe Foster has been Portfolio Manager for the VanEck International Investors Gold Fund since 1998 and the VanEck – Global Gold UCITS Fund since 2012. Mr. Foster, an acknowledged authority on gold, has over 10 years of dedicated experience in geology and mining including as a gold geologist in Nevada. He has appeared in The Wall Street Journal, Barron's, and on Reuters, CNBC and Bloomberg TV. Mr. Foster has also published articles in a number of mining journals, including Mining Engineering and Geological Society of Nevada.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.
Footnotes:
1 ETF Securities: Investment Insights June 2017 - Which Market Shocks Matter for Metals? http://img-stg.bcg.com/BCG-Sowing-the-Seeds-of-Recovery-July-2017-2_tcm9-165833.pdf
2 Lombard Odier: Investment Strategy Bulletin – Gold and banking crisis, why hold Gold in portfolios? November 25, 2011