Source: The Wall Street Journal
Investors talk of gold as the ultimate asset for stashing wealth in uncertain times. But two Harvard researchers say they’ve got it wrong.
Professor Robert Barro and PhD student Sanjay Misra argue in new research that gold is not the hedge investors believe it to be.
That’s a key thought at a time when gold is rallying, partly as investors use it as a safe haven amid an uncertain global economy. Gold is up by almost 29% so far this year.
Were gold to be a good hedge against recessions, its price would shoot up as economic growth and consumption plummet. Yet, between 1836 and 2011, they showed no correlation.
The two researchers also looked at how gold fared during a series of “macroeconomic disasters” in advanced economies, when a country’s real per capita gross domestic product fell by 10% or more over an average period of three to four years. Disasters considered included the Great Depression in the U.S. and the experiences of Germany and Japan during the Second World War.
They found that during the 56 disaster periods investigated between 1880 and 2011, gold price gains—after inflation is taken into account—averaged 2.1% a year, not much better than in normal periods, when it rose 1.5%.
In fact, Mssrs. Barro and Misra’s figures show that gold prices swing around almost as much as stock prices—meaning it isn’t the stable investment many think it to be—and yet their return is much closer to what ultrasafe U.S. Treasurys offer.
From 1836 to 2011, the standard deviation of annual gold returns, which gauge how much prices swing compared to their average, was 13.7%, just 3% short of the temperamental U.S. stock market.
And yet, it offered little to compensate investors for that: During the same period, the average growth rate of the price of gold in the U.S. was 1.1% a year, only marginally higher than the 1% average real rate of return on three-month U.S. Treasurys, according to the research.
All in all, maybe not such a good deal, even if Donald Trump is elected. Den Rest des Beitrags lesen »