Gold vs Stocks Investment Performance From 2000 to Mid-2020

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Investors are often forced to make tough calls and choices. Determining whether to put money in gold or stock is never a straightforward answer. A lot has changed in recent decades, making for a rather interesting situation. 

Historical Performance Data

Before making any well-informed decision, it is often advised to look back at what happened before. Investing in either gold or stocks is not a decision to take lightly whatsoever. The consequences of this decision can be very severe, depending on which option one explores and how they go about doing so. 

Historically, the stock market has outperformed precious metals time and time again. The difference between both markets has only grown larger as more time progressed. At the same time, there has been one point where both investment options briefly flipped positions.

Source: MacroTrends

In August of 2011, gold offered a 361% return, whereas the Dow Jones Industrial Average returned 344%. Such incidents are quite rare, however. It is the only time such a “change” occurred in the past 25 years. A new paradigm shift seems, despite the current global market conditions, rather unlikely. 

Comparing both industries today, they are both worthwhile investments. Historical percentage returns for both stocks and gold remain very high. Both investment options should be looked at from a long-term perspective. Neither gold nor stocks will pay off in the short-term, unless a sudden bullish trend emerges. 

Zooming in on Recent Performance

A lot of things have changed across both markets in the 21st century. Although the overall performance chart above still favors investing in stocks, the year-by-year chart tells a very different tale. There have been some very bullish years for stocks, but also times when the results were rather disappointing. 

In theory, the DIJA should return an average of just below 5% per year, Between 2000 and 2014, however, the overall return is just 10% in a 14-year timespan. The financial crisis of 2008 has certainly disrupted the overall momentum in that regard. Even so, it shows that there are no certainties when investing in stocks, no matter what a historical chart may show you. Things have certainly improved again since, but it is still worth taking note of. 

Source: StockCharts

Looking at the performance of gold in the 21st century, the results are also rather mixed. The year 2000 yielded a negative performance, whereas the next 12 years all saw significant price increases. In some cases, the yearly performance surpassed 25%, clearly blowing stock returns out of the water altogether.

That being said, the 2013-2015 period was quite terrible for gold investors. Negative performances three years in a row is rather unheard of for precious metals. Particularly the 27.79% deficit in 2013 eroded a lot of investor confidence. Even during these tough times – as well as the negative performance of 2018 – the gold price never dropped below $1,000 per ounce again. That value hasn’t been seen since 2009, and is rather unlikely to make any sort of comeback. 

Source: Macrotrends

So far, the year 2020 looks promising for gold. Its yearly performance currently sits at 27.93%, despite facing a steep drop in march and being unable to support the high of $2,061 per ounce. It seems plausible to assume that, given the financial turmoil, gold will outperform stocks by quite a margin once again. 

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