The Real Return on Gold Investment
Gold delivers strong returns whether measured in forints, euros, or dollars. This is especially true when you avoid panic buying or selling and invest at regular intervals.
Goldtresor Team
· 3 min read
Gold delivers strong returns whether measured in forints, euros, or dollars. This is especially true when you avoid panic buying or selling and invest at regular intervals.
20% Annual Return, Anyone?
Our attention-grabbing video illustrating the four-year return on gold investment measured in forints demonstrates clearly what kind of performance gold can deliver:
https://www.youtube.com/watch?v=WNqnd_0Zdyo
Over the period we examined, from 2018 to November 2022, an initial investment of HUF 1 million grew to more than HUF 1.8 million after costs. This means that over the past four years, an investor who built their savings with Goldtresor achieved a real return more than 10 to 12 percentage points above the annualised average inflation recorded over the same period.
This is a performance that would have even the most seasoned wealth manager licking their fingers with satisfaction and leaning back contentedly to collect a well-deserved success fee.
The table below also shows that those who invested from forints into gold over a 20-year horizon can expect a value increase exceeding 700%.
It may come as a sharp blow to the hundreds of thousands of Hungarians keeping their "savings" under the mattress or in non-interest-bearing bank deposits that when the modern forint, then still gold-backed, was introduced in 1946, the gold price was fixed at HUF 13,210 per kilogram. Today, a one-kilogram gold bar fluctuates between HUF 22 and 23 million. The historical advantage that gold purchases have once again become legal and more accessible than ever before is also not to be overlooked.
All of the above is, of course, retrospective data and therefore not sufficient on its own for making investment decisions, yet it does give us a clearer picture of why investing in gold makes sense.
The Return on Gold Investment in Euros and Dollars
Gold's strong performance in forints is not merely a consequence of the forint's structural weakness, driven by Hungary's economic openness and extreme exposure to global crises.
The World Gold Council (WGC), the umbrella organisation representing the world's gold mines, provides a comparison of gold's performance against major equity and bond indices in the world's leading currencies, going back to 1971, on its website.
In euros, gold has delivered an annualised return of 8.60% per year, and in dollars 8.66% per year, on a discounted basis over the past 20 years. This performance is comparable to the total return, including dividends and interest payments, of US, European, and global equity, bond, and commodity indices.
The one-year column in the charts covering the period from January 2022 to January 2023 also answers the question of why we need to hold gold in our portfolio. During the turbulent year of 2022, gold's return measured in both dollars and euros outperformed the majority of asset classes including even the commodity indices bolstered by soaring inflation and the outbreak of the Russian-Ukrainian war. Any investor who had prepared in time, whether through a one-off or regular gold investment, was able to effectively offset losses incurred in the bond and equity markets.
It is also clear from the charts that investors who panic-bought at the peak of the gold market bubble that burst exactly ten years ago, in January and February 2013, did not fare well with their gold investment measured in euros or dollars. As with any other investment, timing matters for gold as well. Of course, most prospective gold investors do not have the time to watch gold prices like a hawk, searching for the optimal entry or exit point.
For them, the Goldtresor gold account service enabling regular physical gold savings is particularly valuable. It allows you to save in gold (and silver, platinum, or palladium) with any amount and at any frequency you choose, thereby minimising potential losses caused by large price swings and providing easy access to effective protection against the depreciation that affects every currency globally.
Account opening, and indeed account closure, takes just a few minutes, is entirely free, conducted 100% online, and carries no obligation to make a deposit.
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