It’s commonly believed that gold is a safe haven asset that can protect us from not only purchasing power risk, but also permanent loss risk. This is believed to be particularly true during periods of crisis. But this great piece from Vanguard shows that T-bonds are actually a better safe haven than gold. Here’s what they show:
- Gold is even more volatile than stocks.
- Gold does not really protect against inflation.
- During flight to quality periods T-bonds consistently perform better than gold:
That’s probably not surprising to readers here. Gold is essentially a commodity with a special currency component. This makes it slightly different than other commodities, but only because of what I refer to as a “faith put” that is a remnant of the gold standard and the metallist monetary era. This gives gold some unique and interesting elements and even makes it a potentially useful non-correlated asset at times, but it’s important to keep the facts straight when considering an allocation towards gold.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.