By Matthew Gaude & Shawn McGuire
Heading into 2023, we have been positive on gold and silver’s prospects after a muted performance in 2022. As we have witnessed the first half of this year, the regional banking crisis, the U.S. debt ceiling, and ongoing geopolitical turmoil globally have put risk front and center as another catalyst, on par with rates and recession, to continue to support the case for gold for the remainder of this year. Market risks are always a focus for gold investors, and 2023 has had no shortage of events to keep investors on their toes. With ongoing uncertainty on the global geopolitical front and recent risk events, the potential for further unforeseen risk events remains elevated.
Looking at major drawdowns in U.S. equity markets, according to State Street Global Advisors, “gold has not only outperformed U.S. equities on a relative basis but also on an absolute basis in the majority of cases. During peak-to-trough drawdowns greater than 15% on the S&P 500 Index, gold averaged 5.8% total return versus -24.2% total return on the S&P 500 and -21.9% on the MSCI World Total Return Index. And during these 13 drawdown events, gold delivered positive returns in 10 of those periods. In the three periods when gold had a negative return, it still reduced portfolio drawdowns and volatility when compared to a portfolio with no gold. Furthermore, gold tends to maintain gains over time even as markets recover.
Read more of our thoughts here.