Summary
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Over the past three decades, gold has not represented a good long-term investment. It took the worst financial crisis since the 1930s, a sharp depreciation in the U.S. dollar and a rekindling of inflation fears for the 30-year total return on gold to just barely beat inflation.
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Over this same period, even if we consider its diversification appeal owing to a lack of correlation with the stock market, gold has not constituted an attractive investment portfolio asset.
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Still, gold has acquitted itself well as a safe haven by outperforming the S&P 500 over the course of the past two recessions. However, it is important not to hold on to this investment for too long: Historically, the return spread has swung far in favour of the stock market in the two years following a market trough.
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Since inflation targets have become a core concern of central banks, the value of the U.S. dollar is what above all explains the variance in the price of gold.
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Headwinds are building against the price of gold. Risk aversion is gradually returning to pre-crisis levels and inflation fears should abate.
