The Financial Gains of Investing in Gold: A Decade Later

Gold: What Would €1,000 Invested 10 Years Ago Be Worth Today?

Gold has long been regarded as a safe investment option.
Its allure remains strong even amidst the rising interest rates from central banks.
The tangible nature of gold, coupled with its ability to provide protection during economic uncertainty, positions it as a safe haven during market turbulence.

In this article, we explore the potential return on an investment of €1,000 made in gold a decade ago.
We will assess gold’s ability to safeguard capital, combat long-term inflation, and generate profits.

Gold Investment Calculation

Calculating the value of a €1,000 investment in gold a decade ago starts with historical gold prices.
The London Bullion Market Association (LBMA) updates gold prices twice daily and is considered the benchmark for the precious metals investment sector.

Ten years ago, €1,000 could have bought approximately 1.041 troy ounces (32.40 grams) of gold, as the price in October 2014 was around €959.92 per ounce, translating to about €30.86 per gram.
Today, gold is trading at record highs of €2,318.31 per ounce (or €74.47 per gram).

This appreciation means that if you had invested €1,000 in gold ten years ago, it would now be worth approximately €2,415.

Reasons Behind Gold’s Rally

The increase in gold prices stems from a combination of economic and geopolitical factors.
Surprisingly, some correlations, such as rising interest rates and a strong dollar, did not hinder its progress.
We will analyze the interplay of gold with interest rates, inflation, bonds, and central bank policies.

Gold, Interest Rates, and Inflation

Gold is viewed as a tangible asset that maintains its value amid rising inflation due to its limited and relatively constant supply.
Despite not yielding interest, gold tends to increase in value with inflation, though it can falter when interest rates rise.
Notably, during 2022-2023, as central banks raised rates, gold did not decline; it instead showed consistent growth.

Gold and Bonds

For a time, high borrowing costs made gold less appealing compared to other investments, like inflation-linked bonds.
However, as of mid-2024, with the end of the tightening cycle, bond yields have decreased, revitalizing gold’s attractiveness.

Central Banks and Gold

Central bank activities also significantly affect gold pricing.
They purchase gold as reserves to diversify their fiat currency holdings.
According to the World Gold Council (WGC), central banks acquired 1,037 tons of gold in 2023, marking the second-highest annual purchase on record.

Impact of the US Dollar

The performance of the U.S.
dollar is another critical factor for gold’s value, as gold is priced in dollars.
Typically, gold appreciates when the dollar weakens, a scenario observed since October 2022.

Investment Demand for Physical Gold

Alongside central bank purchases, the demand for physical gold as an investment has pushed prices to new heights.
According to WGC data, demand for bullion and coins has surged by 17% in the past year compared to the last five-year average.

Conclusion

The information provided in this article should not be considered the sole basis for investment decisions.
Readers are encouraged to exercise their judgment regarding their investment strategies and risk tolerance.