Personal Investments • Re: What is the percentage to hold in gold?

That is not a strategy. It is a side effect. He looks for the businesses to buy. If he hasn't found a good business then money is sitting in cash/treasury.

Anyway, OP is looking for inflation hedge.

Gold can fail as inflation hedge. Here are few examples:

From 1980 to 1984, annual inflation averaged 6.5%, but gold prices fell 10% on average each year. Returns not only fell short of the inflation rate, but they also underperformed real estate, commodities and the S&P 500. Annual inflation averaged about 4.6% from 1988 to 1991, but gold prices fell approximately 7.6% a year on average.

https://www.forbes.com/advisor/investin ... ion-hedge/

this.

since the OP is looking for an inflation hedge s/he should understand it hasn't been that at different times. From Larry Swedroe:

In terms of gold’s value as an inflation hedge, the following example should help provide an answer. On January 21, 1980, the price of gold reached a then-record high of $850. On March 19, 2002, gold was trading at $293, well below its price 20 years earlier. The inflation rate for the period from 1980 through 2001 was 3.9 percent. Thus, gold’s loss in real purchasing power was about 85 percent. How is gold an inflation hedge when it lost 85 percent in real terms over 22 years?

Here’s an example with an even more extended period. As seen in the chart below, with gold now trading at around $2,000, it has lost more than 20 percent of its real value (inflation-adjusted) from its peak of about $2,533 in February 1980. That’s more than 42 years with a significant loss in real value.

source: https://alphaarchitect.com/2023/05/gold/

I agree with dcabler in that the OP is likely suffering from recency bias. The evidence for this is not only that s/he is looking at recent outperformance of gold but also looking in the rearview mirror with regards to tips. I haven't looked recently but it was only a few months ago that experts like William Bernstein was pointing out that tips have a REAL rate of return of something on the order of 2% (that's AFTER inflation). So while the OP may have purchased tips when rates were negative, that doesn't make them a bad investment to buy NOW. And Bernstein talked about purchasing a rolling ladder of tips maturing over the next 30 years to ensure a positive rate of return above inflation for your entire retirement. Not bad.

Statistics: Posted by arcticpineapplecorp. — Sun May 26, 2024 8:59 pm

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