Is Gold a Good Investment? Central Banks' Reason Isn't Yours
Philipp 12:02 Episode 3 of Ask a Banker
Is Gold a Good Investment? Central Banks' Reason Isn't Yours
Gold returned 1.3% a year after inflation since 1900, against 6.6% for US stocks. Central banks buy it to insure a reserve, and that is not your risk. Episode 3 of Ask a Banker.
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Is Gold a Good Investment? Why Central Banks' Reason Isn't Yours
Gold can be a reasonable small holding, but as insurance, not as an engine of returns. From 1900 to 2025 it returned 1.3% a year after inflation in US dollars, against 6.6% for US stocks (UBS Global Investment Returns Yearbook 2026), and it is not a dependable crash hedge: it fell 30% from its 2008 high, and in March 2020 it fell as fast as shares for more than a week. Central banks are buying it for a different reason. Since close to €300 billion of Russia's central-bank reserves were immobilised in 2022, they want a reserve asset that is not another government's promise. That is insurance for a currency reserve, not for a private portfolio. Buy gold only if you can name the risk it insures, in a size that can neither rescue nor ruin your portfolio, at a holding cost that does not eat its small real return.
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