For investors fearing a stock market rout, the collapse of banks or other financial institutions, or runaway inflation, gold has always been viewed as a safe haven.
In recent years many of the most popular investment funds have built their exposure to gold. But has it worked?
Telegraph Money has crunched the numbers to find out, using data service FE Analytics. We have created model portfolios in which gold makes up varying proportions of the total and then looked back at their performance over a number of timescales.
The shares element of the portfolio is represented by the FTSE World Index of leading global shares, the portfolio is rebalanced each year back to the percentages outlined below.
- 95pc shares, 5pc gold
- 90pc shares, 10pc gold
- 80pc shares, 20pc gold
- 50pc shares, 50pc gold
Over the long term it has paid to be gold. Investors typically buy gold in the hope that it will rise in value when stock markets fall, when panic sets in, or when inflation heads up.
Gold maintained its price during the technology-fueld staock market collapse of 2000–2003, and then gained further during Iraq war and in response to corporate scandals such as energy giant Enron’s collapse. It soared ahead of the FTSE World index when the global financial crisis hit, and posted its biggest gains in the nervy years that followed.
Long term investors will not have enjoyed the last few years however. In 2013, some of the fears that had relentlessly pushed up the gold price began to dissipate — and with inflation falling — it then fell sharply.
Even with the boost enjoyed as a result of recent political shocks, including Brexit, it is still not back to previous highs.
Someone in the 5pc gold portfolio would be up 228pc since June 1999 before fees, compared to 321pc for the 50pc gold portfolio.
Since the depths of the financial crisis
The long term scenario laid out above is the only one of the three discussed here where gold has led to greater returns overall.
Since the financial crisis, investors would have been better off — and enjoyed a smoother ride — sticking to shares.
The price of gold, as with any commodity, is entirely driven by supply and demand. As 2013 proved, it is capable of dramatic fluctuations.
From September 14, 2008, the day before the collapse of Lehman Brothers, the 5pc gold portfolio has returned 154pc, compared to 124pc for the 50pc gold weighting.
Since the Brexit vote
Gold began rallying in late 2015 when global markets hit a rocky patch, and continued its rally when the Brexit referendum was announced. It made larger gains during this period than after either the referendum or the US presidential election.
But since June 23 last year — the day before the referendum result — the FTSE World index has performed far better than gold. This is partly due to the weakened pound boosting the return from overseas investments, but also the surprising market rallies that followed the year’s political shocks.
The 50pc gold portfolio returned 17pc over the period, compared to 32pc for the 5pc portfolio.
However, more domestically-focused shares have outpaced gold too. Despite initially falling heavily while gold jumped in value, the FTSE 250 index (which represents smaller UK-listed companies with more domestic business focuses) returned 15pc since June 23 2016, compared to 9pc for the S&P GSCI Gold Spot.