Study: "Gold for Long-Term Wealth Accumulation"

Prof. Thorsten Hens and Alvin Amstein (student assistant) from the Department of Finance at the University of Zurich have developed a comprehensive financial analysis on the topic of “Gold for Long-Term Wealth Accumulation”.

Summary of the study

Gold is not only a metal with unique properties such as durability and immutability, but in ancient cultures (e.g., Egyptians and Aztecs), it symbolized the sun, which was worshiped as a god. Even today, gold is used as jewelry with high symbolic value—such as in wedding rings. Gold has a tradition of several thousand years as a store of value, and for many decades, the financial systems of Western economies were anchored in gold.

Even today, central banks hold significant amounts of gold to protect against crises. This study examines how much gold investors should hold in their portfolios and whether, given new technological developments such as blockchain, gold is still relevant for wealth accumulation.

The study concludes that gold plays an important role in long-term wealth accumulation. Compared to stocks, it is not the main driver of portfolio returns but acts as insurance, ensuring that investors remain resilient during crises when stocks may suffer significant losses and ultimately emerge stronger from those crises. Newer investments like Bitcoin or tokenized gold are less suitable for long-term wealth accumulation, as Bitcoin is highly volatile and the tokenization of gold has yet to be firmly established in a secure legal framework.

Another Gold Study?

Gold as an investment has been frequently studied in the scientific literature. A comprehensive overview up to 2015 is provided by O'Connor et al. (2015). In addition, banks regularly publish gold studies, summarizing this knowledge concisely for their clients.

The distinctive features of this study are numerous. First, a decade has passed since 2015—a period marked by a global pandemic, the resurgence of inflation, a war in Europe, and the rise of a new investment, Bitcoin, which is being promoted as an alternative to gold. Secondly, we consider not only the US dollar as a reference currency but also the Swiss franc, along with important factors such as taxes, transaction costs, and counterparty risks. The inclusion of the Swiss franc as a reference currency is significant, as the Swiss franc itself serves as a safe-haven currency, potentially reducing the need for gold.

Finally, the portfolio allocations are calculated by incorporating the perspective of Modern Portfolio Theory, alongside the theory of Optimal Wealth Growth and the psychologically grounded Prospect Theory. These key aspects of the present study are complemented by a brief history of gold and the sustainability of gold.

We would like to thank...

... Bank von Roll  for their patience and the financial support of this study. Furthermore,Isabella Kooij, Janos Mayer, Malte Schlosser und Alexandre Ziegler have given valuable inputs. Last but not least, we learned a lot about the history of gold from Malika Ochchaeva's bachelor thesis.

More information:

Study: "Gold für den langfristigen Vermögensaufbau" (German only), coming soon