Gold is a fairly unique asset not only in its historic resiliency but also in its ability to bring out the emotions in many investors. But look beyond the hype and the hate, and gold has a lot to offer from a diversification perspective.
Gold is always very hot or cold, and combined with its lack of yield and a mediocre long-term average return many investors don’t care for it in their portfolios. However, others appreciate how it does really well both in times of negative real interest rates (such as the very high inflation in the 70’s) and also when stocks struggle, and they find it to be a great portfolio asset from a rebalancing perspective.
Investors should note that the repeal of Bretton Woods in 1971 changed how gold is fundamentally priced. As a result, gold experienced a significant 3-year surge from 1972-1974 for reasons more complicated than normal market returns. So when studying portfolios with gold be sure to also look at the periods starting in 1975 and later.
There is a common misconception that gold was illegal to own in the US prior to 1975. While physical gold bullion was indeed prohibited for individual investors prior to 1975, the trade of gold certificates was legalized in 1964. Think of them as similar to how modern gold ETFs work where you don’t have the gold in your physical possession but do have legal ownership.