The authors examine whether gold actually delivers the inflation protection, currency hedging, and safe haven qualities investors often assume. They find gold has been unreliable over practical horizons, while historically elevated real prices have tended to precede weaker subsequent real returns.
The Golden Dilemma
Campbell Harvey, Claude Erb
Research
48 Pages
Key Takeaways
Inflation Hedge Falls Short: Over rolling 10 year periods, annualized gold returns ranged from roughly negative 6% to positive 20%, despite inflation ranging only from 2.3% to 7.3%.
Valuation Matters Historically: Gold’s real price ratio reached 7.3 versus a historical average of 3.2, with similarly elevated 1980 valuations followed by substantial declines.
Supply Remains Constrained: Roughly 75% of the world’s achievable gold supply has already been mined, potentially limiting how quickly production can respond to higher prices.
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