All That’s Gold May Not Glitter

Main content

Gold is up more than 10% this year. Investors have been flocking to gold as the risks now seem riskier in terms of market valuations and geopolitical tensions.

  • Gold is a good portfolio diversifier because it exhibits ultra-low correlations to equity markets and is considered the classic safe haven if economic conditions significantly go south.
  • Inflation has been low. Today’s CPI reading shows core inflation up .1% MoM and only 1.7% YoY. However, gold has not been a good hedge against inflation and its inflation adjusted price is lower now than in 1980.
  • The nominal price of gold spiked to an all-time high of $1,828 in August, 2011 and currently stands at about $1,290/oz. - a 30% drop - while the S&P500 has returned 125% between August 2011 and today.

Even low inflation steadily and surely erodes purchasing power and depletes savings. Retirees in particular need to be aware of the debilitating effect inflation has on incomes. Healthcare expenses have been ominously outpacing core inflation and exacerbating retiree savings shortfalls. So even in retirement, investors may need to stay invested to grow their savings. Please track the price of gold back to 1975 on page 60 of the Voya Global Perspectives™ Book.

Footer content