Gold still outshining stocks and bonds since the turn of the century
By William Watts
Stocks outpaced gold in 2023, but the yellow metal still posted stronger annualized returns since the turn of the century, according to S&P Dow Jones Indices
No yield, no dividend, no problem?
That appears to be the case for gold when it comes to its performance against both stocks and bonds as the calendar flips ever deeper into the 21st century. The chart below from S&P Dow Jones Indices shows the relative performance of the yellow metal, as measured by Dow Jones Commodity Index Gold, versus the S&P 500 SPX, between Dec. 31, 1999, and Dec. 29, 2023.
Unlike some stocks, gold - like other commodities - pays no dividends. Unlike bonds, it pays no coupon. That's often described as raising the opportunity cost of holding gold versus assets that produce some sort of yield. Still, DJCI Gold, which is designed to track the market via futures contracts (GC00), has outpaced both since the turn of the millennium.
Going back to the start of the century, DJCI Gold produced a 7.8% annual return, compared to a 7% return for the S&P 500 during that time, said Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, in a blog post this week.
Adjusting for volatility, gold has provided slightly better risk-adjusted returns than stocks, with a Sharpe ratio of 0.48 versus 0.45 for equities, Luke wrote. The ratio compares the return on an investment with its risk.
Bonds aren't even close when it comes to annualized returns. The iBoxx USD Overall Index, which measures investment-grade government and corporate bonds, has seen an average return of 4.1% since 1999, according to Luke, though its Sharpe ratio is slightly better at 0.89.
To be sure, stocks played catch-up in 2023, with the S&P 500's stellar 26.3% return easily besting both bonds and commodities, including gold. The overall commodity index, the S&P GSCI, saw a return of negative 4.3%, with S&P GSCI Grains falling 15% last year and S&P GSCI Livestock flat amid falling inflation.
Gold, however, solidly outpaced the broader commodity index in 2023, with futures hitting a record high in December as DJCI gold posted a 12.8% return for the year.
-William Watts
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
01-06-24 0710ET
Copyright (c) 2024 Dow Jones & Company, Inc.-
What History Tells Us About the Fed’s Next Move
-
What’s Happening In the Markets This Week
-
Alphabet’s New Dividend: What Investors Need to Know
-
Going Into Earnings, Is Palantir Stock a Buy, a Sell, or Fairly Valued?
-
Going Into Earnings, Is Eli Lilly Stock a Buy, a Sell, or Fairly Valued?
-
What’s the Difference Between the CPI and PCE Indexes?
-
5 Stocks to Buy That We Still Like After They’ve Run Up
-
Markets Brief: Stocks Are Starting to Look Cheap Again
-
AbbVie Earnings: Next-Generation Immunology Drugs Help Offset Humira Biosimilar Pressure
-
Exxon Earnings: Ignore Earnings Shortfall as Long-Term Growth and Improvement on Track
-
American Airlines Earnings: We See Costs Overshadowing Market Share This Year
-
Snap Earnings: Advertising Growth and Snapchat+ Drive Monetization
-
STMicro Earnings: We Still See an Attractive Margin of Safety Despite a Poor First-Half Forecast
-
Alphabet Shares Surge on Strong Earnings, Dividend Surprise
-
Microsoft Earnings: Firm Beats Forecasts on Strong AI and Cloud Demand
-
PG&E Earnings: Near-Term Regulatory Certainty Supports Industry-Leading Earnings Growth