When evaluating the performance of gold as an investment over the long term, it really depends on the time period being analyzed.
For example, over a 45-year period gold has outperformed stocks and bonds, while over a 30-year period, stocks and bonds have outperformed gold and over a 15-year period, gold has outperformed stocks and bonds.
Over the past 30 years, the price of gold has increased by 335%. Over the same period, the Dow Jones Industrial Average (DJIA) has gained 1,255% and the Fidelity Investment Grade Bond Fund (FBNDX) has returned 672%.
Over the past 15 years, the price of gold has increased by 315%, roughly the same as the 30-year return. Over the same period, the DJIA increased by 58% and the FBNDX returned 127%, which are both significantly lower than their 30-year returns. These returns can be largely attributed to speculative bubbles that occurred in the late 1990s.
To gain a historical perspective on gold prices, between January 1934 with the introduction of the Gold Reserve Act and ending in August 1971, when then-President Richard Nixon closed the U.S. gold purchase window, the price of gold was effectively set at $35 per ounce. Prior to the Gold Reserve Act, President Roosevelt had required citizens to surrender gold bullion, coins and notes in exchange for U.S. dollars and effectively made investing in gold extremely difficult, if not impossible and futile for those who did manage to hoard or conceal quantities of the precious metal.
Using the set gold price of $35 and the price of $1,390 per ounce on July 1, 2019, a price appreciation of approximately 3,500% can be deduced. Since August, 1971, the DJIA has appreciated in value by over 1,800% and the FBNDX returned over 2,100%.
As of mid-2019, the price of gold is still below its all-time price high of nearly $2,000 an ounce that it reached in September of 2011. The price sits upon a trendline that has been respected by the market going back to mid-2001.
The relative price strength of gold compared to oil, an in-demand commodity, has been remarkable. The price of crude oil has fluctuated significantly – at one point dropping over 50% in 2015 – while the price of gold is down only marginally. This is interesting because gold and oil prices tend to correlate to some degree. That oil could lose over 50% and gold could remain rock-steady suggests a large amount of support and buying power in the gold market. While oil prices have risen in recent years, this divergence in relative price strength between oil and gold remains.