How risk-free is gold? Investors must learn to look past its glitter

It's in vogue as a 'safe haven' but an evaluation of its track record shows why it's overhyped as one

- DEVINA MEHRA

The phrases 'risk free asset' and 'safe haven' have come back into vogue as far as gold is concerned. This is an addition to the inflation-protection narrative that was prevalent a year or so ago.

As we all know, the price of gold has skyrocketed and is at an all-time high. US President Donald Trump's tariffs and antics have put a question mark on the future of the US dollar (see my last column, bit.ly/42LAVyp), and suddenly in most open forums, I am getting a lot of questions about gold.

So is gold really a safe haven or risk free? What does the data show?

Taking a wide-angle lens to look at gold prices for 50 years offers a wholly different picture from its general image.

The metal reached a price of over $666 per ounce in September 1980. Where was it some 19 years later in September 1999? At $255 per ounce—a full 62% lower!

It crossed the $666 price next in 2007, nearly 27 years after the first high.

The next high? $1,772 in 2012. And then a 40% fall to $1,062 three years later. A new high had to wait eight years to 2020, post the covid panic.

That, ladies and gentlemen, is the story of gold in a few sentences.

Gold as a safe haven? Doesn't look like it, does it? So were our grandmothers wrong in putting their savings into gold? Not quite. Indians were in a peculiar position until fairly recently, as there were capital controls and hence Indians could not invest in overseas assets. And that is why the rupee price trend of gold looks reasonable.