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The Modern Day Gold Rush Thumbnail

The Modern Day Gold Rush

Many moons ago, I was a Personal Finance Planning major at Central Michigan University. I distinctly remember in the Spring of 2012, my finance class had a competition amongst my peers to see who could make the most money in a trading simulation system. At the time, gold was trading at all-time highs. It was the “hot” asset class that was outperforming everything else. The code was cracked (buy gold), and I was destined to be the top performer. Alas, it was not to be, but it got me thinking. With all of the recent headlines of gold hitting all-time highs and the infatuation from the consumer: Is gold really an asset class for the long term?

Obviously, investment strategy is a crucial aspect of financial planning. Choosing the right assets for a portfolio can significantly impact long-term wealth. Gold is currently hitting all-time highs. In that same breath, the S&P 500 (which is considered the best representation of the U.S. Stock Market) has hit an all-time high 16 times so far this year. What has been the best asset class between the two since the highs in the Spring of 2012? The simple answer is the S&P 500, as illustrated by the chart below: 

Just because the S&P 500 has outperformed in that time frame does not mean you should completely exclude gold as an asset class. It holds many valuable characteristics:

  1. Inflation Hedge: Gold acts as a hedge against inflation. When fiat currencies lose value, gold tends to appreciate.
  2. Global Uncertainties: Geopolitical tensions, economic crises, and currency fluctuations drive investors toward gold.
  3. Central Bank Policies: Interest rate decisions impact gold prices. Lower rates favor gold.

We have held Gold as an allocation in our portfolios at times when appropriate. Most recently, many of our portfolios owned gold via the exchange-traded fund GLDM. We purchased this position in January 2021 and exited it in August 2023. I think the above is a great illustration of active strategic management. There is a time and place for every asset class. 

In conclusion, every asset class serves a purpose. This illustrates that just because an asset is outperforming, doesn’t mean it always will. We here at FSG believe in diversification.

Written by: Kyle Cooper

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Financial Strategies Group, Inc employees providing such comments, and should not be regarded as a description of advisory services provided by Financial Strategies Group, Inc or performance returns of any Financial Strategies Group, Inc Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Strategies Group, Inc manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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