MW What 28 years of hot inflation say about gold's ability to be a hedge

By Steve Goldstein

Central bank buying is seen as a central plank of the investment rationale for gold.

Gold's been on a sensational run, but the only thing it can't be called is an inflation hedge.

According to the global investment returns yearbook presented on Tuesday by professors Elroy Dimson, Paul Marsh and Mike Staunton, gold's return has been negative in 13 of the 28 years in which inflation has exceeded 3%.

The annualized return, after inflation, is just 1.3% since 1900, though it is 4.7% in the 54 years since the U.S. liberalized exchange rates.

Gold (GC00) was steady on Tuesday after climbing over $5,300 an ounce on Monday. The yellow metal is up 81% over the last 52 weeks.

The annualized return, after inflation, for U.S. stocks has been 6.6% since 1900, compared to 1.6% for bonds and 0.5% for bills, the authors find.

   Return                                                                                               Asset              GM (%)  AM (%)  SD (%)  Lowest (%)  Year  Highest (%)  Year 
   Nominal                                                                                              Equities           9.8     11.6    19.5    -44.3       1931  57.0         1933 
   Bonds              4.6     5.0     9.3     -26.1       2022  40.4         1982 
   Bills              3.4     3.5     2.7     0.0         1938  14.7         1981 
   Inflation          2.9     3.0     4.6     -10.8       1921  20.4         1918 
   Real                                                                                                 Equities           6.6     8.6     19.8    -38.6       1931  55.8         1933 
   Bonds              1.6     2.2     10.7    -30.6       2022  35.2         1982 
   Bills              0.6     0.5     4.4     -15.0       1946  17.6         1921 
   Premiums                                                                                             Equities vs Bills  6.1     8.0     19.3    -44.9       1931  56.6         1933 
   Equities vs Bonds  4.9     7.0     20.3    -50.9       2008  57.1         1933 
   Bonds vs Bills     1.5     1.7     8.9     -27.1       2022  27.0         2011 
   Source: Dimson/Marsh/Staunton. GM = geometric mean, AM = arithmetic mean, SD = standard deviation, 

In just the period since 2006, the equity returns after inflation are 7.6%, vs. 0.8% for bonds and -0.9% for bills.

The authors also studied style investing and found the momentum factor has the strongest and most persistent driver of performance over the long term - delivering a premium of 7.7% per year in the U.S.

-Steve Goldstein

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March 03, 2026 06:15 ET (11:15 GMT)

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