It can be a fun exercise to compare the returns of different investments like gold and shares over time to inform our decisions as investors (and scold ourselves over missed opportunities).
Surprisingly, gold has outperformed the S&P 500 Index (SP: .INX) since 2000.
The S&P 500 in the 21st century
At the time of writing, the S&P 500 index sits at approximately 5,614.66 points.
For the sake of the exercise, this number will be compared to March 2000, where the index reached 1,552.87 points.
This represents an increase of approximately 4,062 points, or about 261.7%, over the 25-year period.
This figure accounts for price growth alone, meaning it excludes dividends and the impact of inflation adjustments.
On a side note, it's also important to reflect on the resilience of the S&P 500 through this period that included several global economic events like the 2007-2008 financial crisis and the COVID-19 pandemic.
The gold standard
When we consider the returns of this commodity over the same 25 year period, it has beaten the S&P 500 by some margin.
Gold is a commodity that trades based on supply and demand. The interplay between supply and demand ultimately determines the spot price of gold at any given time.
At the time of writing, it is trading at a commodity price of $3,039 USD
In March of 2000, it was trading at a commodity price of $280.65 USD.
This represents a rise of 983.1% during that timespan.
However, unless you've had a gold bar hidden under your bed for the last 25 years, chances are you have bought and sold shares in a company that mines the commodity, or an ETF.
That means that while the price of gold has increased significantly during that time, the returns for investors isn't necessarily identical.
How to invest
There are a few different ways to invest in gold. You can buy physical gold like bullions or coins directly from the Royal Australian Mint.
Or, you could buy jewellery.
However, for many investors, a more realistic option could be gold mining shares.
The share prices of these companies tends to (generally) follow the commodity price.
However miners also run businesses. This means they could grow over time and investors could benefit from this increased production. This can provide upside that owning physical bullions or coins never will.
On the flip side, the costs of production, issues with workers or unforeseen damages to a site mean miners could perform worse than the current gold price depending on what's going on with the miner.
If you are looking to invest in an individual gold mining company, you might consider:
ETFs
If you are looking for a single investment that reflects the value of physical gold, you might consider ETFS Metal Securities Australia Limited (ASX: GOLD)
This ETF aims to track the price movements of the commodity in Aussie dollars.
For example, over the past year it has risen 44.07%, whilst the price of Gold as a commodity has risen by roughly 40%.
To show how its fared over a longer period, GOLD is up almost 700% since it was first listed on the ASX in 2003.
If you want a single investment that provides diversified exposure to gold miners, two options include:
VanEck Investments Limited – VanEck Vectors Gold Miners ETF (ASX: GDX)
This ETF gives investors exposure to a diversified portfolio of companies involved in the gold mining industry.
At the time of writing it includes 57 holdings and has risen by 55.38% over the past year.
BetaShares Global Gold Miners ETF – Currency Hedged (ASX: MNRS)
This ETF tracks the performance of the largest global gold mining companies (ex-Australia), hedged into Australian dollars.
At the time of writing it includes 47 holdings and has risen 58.19% over the past year.
