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Long-term return data sheds light for investors

In rand terms, gold has best maintained its value over the last 50 years.
Gold makes for an interesting long-term investment case, writes economist Mike Schüssler. Picture: Bloomberg

Investing is often not an art or a science but a total poke in the dark. Some tell you such and such fund did well, and others tell you about a stock that you must buy. Some insist that property is the way to go.

Often even financial advisors have a limited view of the investment world. I have heard bright young things tell folk to invest in many a dud. They show a year or five-year history with a nice projection. They give classes on how to get rich or invest in bitcoin. My question is: have they done their homework and looked at the whole picture? 

One should not compare the returns of just one asset class as that would be a false measure.

Are risks such as inflation considered? What about the tax impact on investments, and how do costs impact investing in certain assets classes? In this first article, we consider after-inflation returns only and leave out the impact of costs and taxes.

Looking back

Doing real investment homework requires considering returns over a longer period to include a few economic cycles that show us a more ‘normal’ picture –  one that is not distorted by a year or two of exceptional performance.

There was the US asset manager ironically called Long Term Capital Management, which bet the house and lost on data that spanned only 10 years.

Below are the after-tax returns of investable asset classes available to South Africans and reported on as investable over this time period. As few assumptions as possible (actually just rental income) are made in the tables, and the results are very interesting. They should be required reading for every investor.

After-inflation returns for South African assets

Number of years

Total gross return JSE

SA bonds real yield

91-day money market yield

Total gross house return

Gold in rand

Last 50 years






Last 25 years






Last 15 years






Last 12 years






Last 10 years






Last 5 years






Last 3 years






Last 1 year






Source: SA Reserve Bank, Bank of International Settlements, Stats SA, New York gold price at end of period

Note: All share indices as reported on in periods as displayed in the SA Reserve Bank quarterly bulletin at the time. Yield for bonds are 10 years and over government bonds in SA, and represent yields to maturity. Total house returns are the real SA house prices as recorded by the Bank of International Settlements. Rental returns are assumed at less than 8% a year before costs such as rental agent fee and property taxes. We do however allow for residential houses standing empty and some maintenance. Inflation used is the headline inflation index average for each year. All investments and returns are in rand. Dividends reinvested, as are rents. Gold carries no interest here. There are no investment costs or taxes involved here (more on this at a later stage).

In the long run, all that glitters is gold

The most surprising result is that over the 50-year period, since 1969, gold in rand terms has maintained its value best. This is partly owed to the rand being fixed early in the period and once the rand floated a little, the impact of the currency was powerful.

Gold in dollar terms increased from $35.45 in 1969 to $1 282.4 per ounce in 2018. This represents a 7.6% compounded nominal dollar return. Of course, once translated into rands, the nominal annual returns shoot up to 14.2% compounded for 50 years.

Once you allow for inflation in SA, the return drops to 4.6% per year.

But gold shines compared to all other asset classes over this 50-year period, and has been largely ignored by asset managers in recent years. Moreover, some other commodity assets also returned reasonably positive rates over the last 50 years according to The Economist’s all-items commodity price index.

Gold was however the worst performer over the shorter term by a country mile.

It is, however, not on the investment horizon for most of the time. As an aside, the nominal returns would have been 10.53, which beats SA house prices and fixed interest rates and was very close to bond returns (although this view changes after tax).

Over the last 50 years, the JSE also performed far better than inflation and returned nearly 4% per year compounded. In nominal terms, the JSE returned 13.47% per annum.

In fact, no investment class had negative returns over 50 years in SA in real terms.

As can be seen in the table above, the after-inflation returns are also all positive over 25 years.

Risk factors

The risk factors, however, are not only inflation but things like taxes, longevity, costs, liquidity and the risk of failure.

These other factors may not be fully quantifiable but I would guess that the JSE should return at least 2% more than government bonds, which are considered the safest investment.   

However, in the last 12 years the JSE and house price total returns turned negative albeit just slightly for the local stock exchange. Once again gold shines and, while one hears little of the yellow metal, as a hedge against inflation it has done its job well.

Over the last three and five years as well as between 2017 and 2018, South African long bonds have performed best. Returns were between 3.9% and 4.6% compounded after inflation.


Fixed investment accounts at 91 days fixed also had positive returns.

However, the JSE lost value after inflation for all three shorter periods. This is somewhat expected in a low growth economy. Today, the JSE makes much of its income offshore and this shows that something else is wrong. Perhaps sentiment, or perhaps our corporates have not been as successful as hoped, or the JSE has run ahead of itself.

Gold also lost value in real terms over the short term. Cash and bonds seem reasonable investments in the short term while the riskier assets are not good at showing short-term returns much of the time.

Total house returns have fared badly over the last 12 years in SA. According to market analysis, the higher the house price the poorer the return as most South Africans are looking for lower-priced houses and rentals.

South African returns by asset class are interesting in that they reveal something about SA.

Assets that reflect the real economy such as houses and stocks are impacted by slower growth, corruption and low confidence.

Financial assets that are more reflective of weaker government (i.e. higher yields) or independence of the central banks (bank deposits) have performed reasonably in the last few years.

Of course, all may change but it does seem that SA assets do not offer the best investments for South Africa’s longer-term investors.

The views and opinions shared in this article belong to their author, cannot be construed as financial advice, and do not necessarily mirror the views and opinions of Moneyweb.




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I’m not sure where you get the figures from but gold in one year has gone from 17k to 23k per oz. Look at for other time ranges.
Gold over 20 years has also beaten Buffett.
And you can buy it as easy as pie on goldcore dot com.
Silver too.

The data is annual data from 1969 to 2018. We have not finished 2019 year yet so I did not include 2019.
Yes, now gold is flying due to concerns about stocks and rates in the developed countries.

How has gold done compared to us equities, us treasuries and us corporate bonds?

Never mind, have learnt that gold bulls can argue any facts they choose to make up

US equities far outperform SA assets including gold.
I am not a gold bull and this is what the data shows. Part of gold performing is a weaker Rand. So gold is an inflation and risk hedge in certain moments like now when the interest rates are flat too negative.
Have Done S&P 500 and that certainly beats SA assets and will write about that soon.

Here is a link to gold versus Buffett. I have no idea about bonds or treasuries. However bonds in the future should lose if interest rates in US go up.

The performance on that chart is highly dependent on your starting point – over 100 years Buffet will outperform gold easily again. Rolling annualised returns much better performance measure as it takes your average one year performance over a multitude of entry points. Hopefully that is what Schussler did as well…

This is also the way all global investment returns of fund managers are required to be presented, in any case in well regulated markets. Think it should become a requirement for media as well.

Very thought provoking article-especially for us SA cowboys who go all in on equities

Do you know what is even better than gold? A CFD on gold. Buy the dips and smile.

I’m pretty sure your JSE returns don’t include dividends, the JSE total return was closer to 7% real.
What is the source?

Mr Mike Schüssler, you are a brave young man! ☺
Not very many economists dare to compare anything to the value of gold, and you are the first South African to do this. What you are saying is that “The emperor has new clothes.”

We can improve the accuracy of the data comparison by simply pricing the Index in terms of ounces of gold. On charting software, we can do a Relative Strength Comparative ratio analysis. We price the index, not in terms of the applicable Fiat Currency, but in terms of ounces of gold. Nobody wants to see this picture Mr Schüssler. This picture carries a warning – no Central Banker, Investment Manager or owner of a pension fund is allowed to view this. Actually, there was a law in the USA that prohibited people from pricing anything in terms of gold. We could get jailed for having this discussion during those times after executive order 6102.

The Value in terms of Gold of the Dow Jones Industrial Index”
1929 = 18.36 ounces
1933 = 1.94 ounces (89% decline)
1971 = 24 ounces
1981 = 1.1 ounce(94% decline)
2000 = 40 ounces
2011 = 6 ounces (86% decline)
currently = 17 ounces (7.5% below the 1929 level)

This is before management fees, brokerage fees, bank fees, exchange levies, income tax, estate duties and probate fees. This is why we have so few wealthy people around. The fiat currency system brings us under the false impression that we are building wealth, while in fact, we are supporting socialist policies with our earnings. You cannot have a “Big Government” and wealthy citizens at the same time.

Why are goldbugs so bad at maths? (or are they just dishonest).
US$ return from Jan 1929 to Jul 2019:
Gold 4.8% pa
DJIA (Dividends reinvested) 9.3% pa

Good point. I am not a gold bull by the way. I am just an average investor looking for the best opportunities to protect and build capital. We have to compare apples with apples here. If you calculate the returns for the DJIA with dividends reinvested, you also have to calculate the returns for gold with interest reinvested. I know gold does not pay interest, but owners of gold do lend that gold to banks, who pay interest on it.

Warren Buffet is the best investor around, and he could not outperform gold over the last 20 years. BKR does not pay dividends, making it easy to compare.

I am not saying that gold is an investment. Gold is a form of cash in my opinion, and sometimes cash is king.

No Sensei banks don’t pay interest on gold deposits, they charge a custodian fee for the service they provide securing the gold deposits.

I am not investing in 1929. Take last ten years Dow total return versus gold total return. Gold would need to be about $2700

You mention costs : what does it cost to insure and store 1000 ounces of gold? If you started with 1000 ounces and sold to cover the 2% or so insurance and storage, how many ounces left today?

Most of the costs you mention are also not relevant – I own my shares directly, brokerage account covered by my bank fees. I fail to see how income tax, estate duties, probate fees, exchange levies and management fees apply to shares but not gold?

One can spin data a hundred ways. Example: If you as a Sensei bought gold when one dollar was 500 Yen, you would be crying in your saki bowl.

An interesting analysis along your line of thinking is pricing gold in barrels of oil. So plot the number of barrels of oil over time instead of gold price. Energy is probably the closest we have to a universal commodity value and in theory, oil spikes in uncertain times which should also coincide with gold spikes.

Oil is cheap now at 25 barrels per ounce of gold. Oil was expensive in 2008 at 7 barrels per ounce of gold. The median price since 1988 is about 15 barrels per ounce. The Bloomberg Commodity Index in terms of gold is at an all-time low. This index is 88% below the level of the year 2000. This describes the extent of the deflationary collapse we are living in currently.

The Bloomberg Commodity Index in terms of gold explains the dire economic situation we as South Africans find ourselves in. We are a nation of commodity producers. Mining and farming form a large part of our economy and these sectors are labour intensive. The profit-margins in these sectors have evaporated. Food and minerals have never been cheaper. Food is expensive in terms of fiat currency but cheap in terms of the stable currency, namely gold.

Some people regard gold as a store of value, as they are more interested in return of investment than return on investment.As to question re oil/gold this is an informative site you could try;
1oz bought 16 barrels oil in 1929 and the same oz buys 26 barrels today.
I had a boating accident and all my au is at the bottom of a lake. No storage fees.

End of comments.



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