A Stellar Performance for Gold

As inflation soared and Russian bombs rained down on Ukraine, the price of gold climbed steadily higher during the first quarter of 2022, scoring a gain of nearly eight percent. The performance, once again, reaffirmed gold’s status as an excellent investment vehicle for wealth preservation and diversification, particularly as a counterweight against losses in stocks and bonds. 

During an extremely volatile first quarter, the Nasdaq Composite lost as much as 20 percent of its value—a decline many use to label a bear market. The S&P 500 was down as much as 14 percent, and the Dow Jones Industrial Average declined as much as 11 percent. A late March rebound trimmed those losses to nine percent for the Nasdaq, five percent for the S&P 500, and four percent for the Dow Industrials.

The fact that bonds offered no sanctuary for equity investors was particularly noteworthy because  many investors hold bonds for precisely that reason—to hedge against their stock positions. Yet long-term U.S. Treasury bonds slipped more than five percent. Corporate bonds were no better, with a Bloomberg index of investment grade bonds dropping nearly eight percent. 

Among popular asset classes, gold provided the only genuine protection against the volatility of stocks and bonds. With inflation rising at a four-decade high rate and little hope for a peaceful resolution of the Russia-Ukraine War, gold has a bullish backdrop, while stocks and bonds face the continuing challenges of economic uncertainty.