Key Takeaways:
- Between January 1971 and December 2022, gold had an average annual return of 7.78%. In 2022, the annual average return on gold was 0.4%.
- Over the long term, the S&P 500 outperforms gold. Over shorter terms, particularly during periods of uncertainty, gold may have higher returns than stocks.
- Only about 10.8% of Americans own gold.
- More millennials are beginning to invest in gold, with 6.5% currently owning gold.
- Global gold production totaled 3,100 metric tons in 2022.
- China mines the most gold in the world (330 tons). The United States mines about 186 tons of gold each year.
Gold vs. S&P 500
Over the long term, the S&P 500 outperforms gold. Over shorter terms, particularly during periods of uncertainty, gold may have higher returns than stocks. As of December 2022, U.S. stocks had an average 10-year return rate of 12.44%, while gold only returned 0.92%.
Let’s say you had $100 to invest in 1928:
- If invested in the S&P 500, it would have been worth $624,534.55 in 2022.
- If invested in gold, it would only have been worth $8,866.76 in 2022.
Gold is a particularly valuable hedge during times of crisis. For instance, during the 2007 bear market, the overall stock market plunged 33% while gold only fell 2%. When the stock market bottomed out in March of 2020 due to the pandemic, the S&P 500 was down by more than 30% year-to-date while gold prices held firm. By March 2020, gold was up by about 1% year-to-date.
Over the past five years, gold’s price increased by approximately 51% while the S&P 500 increased by 55% during that same period.
What Is The Average Return on Gold Investments?
Between January 1971 and December 2022, gold had an average annual return of 7.78%. In 2022, the annual average return on gold was 0.4%.
- Since 1990: From January 1990 through January 2023, the S&P 500 generated an annual return of 7.1% adjusted for inflation. Gold generated an annual inflation-adjusted return of 2.3%.
- Since 2000: Gold generated an annual return of 7.3% adjusted for inflation between January 2000 through January 2021, while stocks produced a return of 4% after factoring in inflation. This was largely due to the financial, real estate, and credit crisis of 2007.
The Value of Gold vs. The Value of the Dollar
Gold typically has an inverse relationship to the U.S. dollar. As the dollar’s value goes up, the value of gold goes down. The weaker the U.S. dollar, the higher the price of gold. For this reason, gold is viewed as a hedge against inflation.
| 1 Year | 10 Years CAGR* | 20 Years CAGR* | |
| Gold | -4.46% | 1.41% | 8.86% |
| U.S. Dollar | 2.10% | 0.83% | 1.29% |
*CACR = Compound Annual Growth Rate
National Gold Investment Statistics
What Percentage of Your Portfolio Should Be In Gold?
Some experts recommend allocating 5% to 10% of your portfolio to gold as a way to ensure stability during market volatility and hedge against inflation. Ultimately, how much of your portfolio you allocate to gold depends on your short- and long-term financial goals and risk tolerance.
How Much Gold Does the Average Person Hold?
When the United States declared gold illegal in 1932, it was estimated that “gold hoarders” were holding onto at least $1.4 billion of the precious metal—double the stated reserves of the Bank of England. Though there was a concerted effort to confiscate gold, experts estimate that at least 20% of that amount remained hidden by individuals.
Americans have been allowed to legally own gold coins and bullion since 1975, but it’s tough to track exactly who owns gold and where they store it. The World Gold Council tries to track the supply and holdings globally, but the organization claims it cannot accurately state the private holdings of gold in the United States or most other countries.
How Many Americans Own Gold?
Only about 10.8% of Americans own gold. Gold is still a niche market, and the majority of Americans do not own any gold or silver.
What Demographic Owns the Most Gold?
Historically, most U.S. gold investors have been professional, college-educated (some with post-graduate degrees as well), upper-income men and women between 40 and 65 years of age.
However, the millennial generation is becoming increasingly more likely than older generations to own gold and other precious metals like silver and platinum. Men and women between 18 and 34 years old have become the most inclined to invest their money in precious metals, with 6.5% indicating they already own gold or silver.
Among generations, Gen Z is least skeptical of new traditional investments but is more interested in alternative investments. Millennials, meanwhile, are the most likely to have made alternative investments within the past six months.
What Are Expense Ratios?
Expense ratios are the annual fees charged to investors to operate and maintain their investment funds, expressed as a percent of their total investment. The average ETF expense ratio is 0.4%. It is calculated as follows:
Expense ratio = total annual fees / total investment
Expense Ratio on Gold ETFs: varies by ETF (higher expense ratio for actively managed funds). For example:
- SPDR Gold Trust GLD has an expense ratio of 0.40%
- Franklin Responsibly Sourced Gold FGLD has an expense ratio of 0.15%
Gold Content of Coins and Bars
Gold bars—also known as bullion—are typically sold by gram or ounce with the purity, manufacturer, and weight stamped on the face of the bar. Others might come with an assay certificate. This certificate guarantees their weight and purity and that they meet the Good Delivery Standards.
Investment-grade gold bars must be at least 99.5% pure gold to hold it in an IRA. Bars with 999.9% finesse are considered pure gold. A 24-carat gold bar is considered pure gold.
Gold coins typically have a lower gold content than bars—either 22 carats (916.7) or 24 carats (999.9). The coin’s purity and weight is usually inscribed on the reverse (back).
| 9K | 37.50% |
| 10K | 41.70% |
| 14K | 58.5% |
| 18K | 75.00% |
| 20K | 83.30% |
| 24K | 99.90 |
Most Popular Gold Bullion and Coins
The 1 Troy oz gold bar (31.1 grams) is the most common size traded around the world. It’s about the size of a military dog tag, but thicker.
- American Gold Eagle Coins
- Credit Suisse Gold Bars
- Johnson Matthey Gold Bars
- Valcambi Gold Combibars
- Canadian Gold Maple Leaf Coins
Gold IRAs
To store gold in a gold IRA, a 99.5% purity level is required. The following gold coins and bars are considered IRA-eligible:
- American Gold Eagle Coins
- American Gold Buffalo Coins
- Australian Kangaroo Nugget Coins
- Austrian Gold Philharmonic Coins
- Canadian Gold Maple Leaf Coins
- Credit Suisse Gold Bars
- Johnson Matthey Gold Bars
- Valcambi Gold Combibars
Gold Storage Facilities & Cost
While you are not required to keep physical quantities of precious metal coins and bullion in approved storage facilities, you must store the gold you purchase to fund a gold IRA in an IRS-approved depository; you can’t keep it in a home safe or safety deposit box. Depositories that keep gold, silver, platinum, and palladium insure the precious metals within their facility to cover theft and natural disasters. These depositories also undergo independent audits.
There are six IRS-approved depositories in the U.S.:
- Delaware Depository
- Brinks Security
- HSBC Bank USA
- JPMorgan Chase Bank North America
- A-M Global Logistics
- CNT Depository
Storage fees for gold are typically 0.5 % to 1.0%. Some depositories might change a flat annual rate depending on the amount of gold being stored. These fees range from $50 to $300.
Gold Taxes by State
| Alabama | Flat-rate Simplified Sellers Use Tax on: – Numismatic coins with a value exceeding the precious metal content resulting from rarity, condition, age, etc. – Processed items |
| Alaska | No Tax |
| Arizona | Sales tax on processed items (e.g., gold-plated coins) |
| Arkansas | Sales tax on processed items |
| California | Sales tax on: – Gold bullion – Numismatic coins less than $2,000 – Processed items |
| Colorado | Sales tax on: – Numismatic and bullion coins that have never been used as currency – Processed items |
| Connecticut | Sales tax on: – Numismatic coins that have never been used as currency – Gold valued less than $1,000 – Processed items |
| Delaware | No Tax |
| District of Columbia | Sales tax on all bullion |
| Florida | Sales tax on: – Coins with a face value of less than $500 – Bullion priced less than $500 |
| Georgia | Sales tax on processed items |
| Hawaii | General excise tax on all items sold and shipped to HI |
| Idaho | Sales tax on processed items |
| Illinois | Sales tax on: – Bullion with purity less than .980 – Coins issued by any other state – Processed items |
| Indiana | Sales tax on: – Gold coins, bars, or rounds with purity less than .9995 – U.S. Liberty Gold Coin – Processed items |
| Iowa | Sales tax on: – Any coins that have never been used as currency – Processed items |
| Kansas | Sales tax on processed items |
| Kentucky | Excise tax |
| Louisiana | Sales tax on gold valued over $1,000 |
| Maine | Sales tax |
| Maryland | Sales tax on: – All numismatic coins – Gold valued less than $1,000 – Processed items |
| Massachusetts | Sales tax on: – Gold coins, bullion, or legal tender valued less than $1,000 – Processed items |
| Michigan | Sales tax on: – Gold products with purity less than .90 – Processed items |
| Minnesota | Sales tax on: – Gold bars or rounds with purity less than 99.9% (by weight) – Coins – Processed items |
| Mississippi | Use tax |
| Nebraska | No tax |
| Nevada | Sales tax on: – Coins and bullion not used as a medium of exchange – Processed items |
| New Hampshire | No tax |
| New Jersey | Sales tax over $1,000 |
| New Mexico | Sales tax |
| New York | Sales tax on: – Bullion valued less than $1,000 – Bullion valued more than $1,000 that (1) were further enhanced, processed, assembled or otherwise altered by the buyer, or (2) are priced more than the value of their metal content – Processed items |
| North Carolina | Sales tax on: – Unrefined and unsmelted gold products – Coins whose value does not exceed its statutory or nominal value – Processed items |
| North Dakota | Sales tax on: – Bullion with purity less than .999 – Processed items |
| Ohio | No tax |
| Oklahoma | Sales tax on processed items |
| Oregon | No tax |
| Pennsylvania | Sales tax on: – Any coins that have never been used as currency – Processed items |
| Rhode Island | Sales tax on: – All unrefined and unsmelted bullion – Processed items |
| South Carolina | Sales tax on: – Any coins that have never been used as currency – Processed items |
| South Dakota | Sales tax on: – Numismatic coins with a value exceeding the precious metal content resulting from rarity, condition, age, etc. – Processed items |
| Tennessee | Sales tax on processed items |
| Texas | Sales tax on processed items |
| Utah | Sales tax on: – Gold bullion with content less than 50% – Numismatic coins not used as legal tender – Processed items |
| Vermont | Sales tax |
| Virginia | Sales tax on: – Unrefined gold bullion – Processed items |
| Washington | Sales tax on processed items |
| West Virginia | Sales tax on: – Unrefined gold products – All coins not used as legal tender – All coins used as legal tender whose fair market value does not exceed their face value – Processed items |
| Wisconsin | Sales tax |
| Wyoming | Sales tax on: – All uncoined bullion – Processed items |
Gold Mining Statistics
Global gold mining production increased following the 2008 economic crisis. Gold mining has evolved considerably since the manual panning technique, which sorts gold through a shallow pan filled with sand and gravel. Other gold mining processes include placer mining, sluicing, and dredging.
- Global production of gold in 2022 totaled 3,100 metric tons.
- China currently mines the most gold in the world with an estimated 330 metric tons produced in 2022, while Australia followed closely, producing about 320 metric tons in 2022.
- The United States mines about 186 tons of gold each year and has the largest gold reserve in the world (8,000 metric tons). More than half of the inventory is stored at the United States Bullion Depository at Fort Knox, Kentucky, where it is guarded by an active U.S. Army camp.
- The production value of gold in the U.S. totaled $11 billion in 2020.
Nevada is the largest gold-producing state in the U.S. Carlin Mines Operations in Nevada mined the largest amount of gold in 2020, 26,700 kg.
Gold Trends and Predictions
Will Gold Go Up in 5 Years?
Many experts believe investments in gold will increase due to concerns of a recession and banking risks following several high-profile bank failures. According to a poll of analysts and traders conducted by Reuters in January 2023, gold is predicted to average $1,825 an ounce in the first quarter of 2023, $1,840 in the second, $1,852.50 in the full year and $1,890 in 2024.
Because gold is considered a hedge against the dollar, investors will continue to invest in gold as a diversification method for the longer term—especially during times of market volatility and stress.
The price of silver is also expected to rise to $23 an ounce in 2023 and $24 in 2024, which is much higher than the $20 for 2023 predicted in previous polls. Silver averaged $21.77 in 2022. In fact, many believe that silver will begin to outperform gold.
Sources
- International Monetary Fund Library: Gold Market Developments. Accessed 3/30/23
- Federal Reserve History: Gold Reserve Act of 1934. Accessed 3/30/23
- Gold IRA Guide 2019 Survey. Accessed 3/31/23
- World Gold Council: About Gold Jewelry and Gold Returns. Accessed 3/31/23
- Statista: Major countries in mine production of gold worldwide in 2022; Average annual return of gold and other assets worldwide from 1971 to 2022; Mine production of gold in the United States from 2005 to 2022. Accessed 3/30/23
- IRS.gov: Capital Gains and Losses and state department of revenue websites. Accessed 3/30/23
- Reuters: High interest rates to hold back gold’s rally; Factbox: Gold milestones on the road to record high. Accessed 3/31/23
- Retirement Living: Americans Turn to Precious Metals To Protect Their Portfolios From Inflation. Accessed 6/9/23