Why is Gold Stereotyped as a Low-Performing Investment?

If you ask most people why they have little or no gold, they will often tell you that the stock market gets much higher returns. This is said with a great amount of conviction, as if it were an obvious fact. However, that fact is far less obvious than they might think. Gold has fared only a few percent worse than the market over the last 20 years yet it is viewed in the same realm of investment as bonds or securities. The first reason for this is decades of extraneous factors manipulating the price of gold at a time when personal investment advice was developing. The second factor falsely deflating gold returns in the minds of private investors is survivorship bias. Additionally, a progressive view of history also distorts people’s views towards gold by considering a specific set of technological and political outcomes as set.

The 1970s and 80s were a unique time of growing investment opportunities for the average person. Technological advances allowed for easier stock buying and selling, and the whole world of investment opportunities became mainstream. With this came investment manuals, talk shows, and discussions. General financial concepts reached the ears of the public at a much higher volume. This was great for investors and advisors, but it came at a very poor time for gold. The Bretton Woods Agreement had recently dissolved so countries had no need for gold in international transactions. While gold had previously served as a backbone of foreign trade, it was replaced by the dollar, and demand by its largest institutional holders dropped. This put a severe dent in the price increases of gold for many years. Gold slowly and steadily being released into the economy dampened any increase in gold demand. Unfortunately, this contributed to the idea that gold itself was a stable yet low performing asset.…