- Gold has been the best performing safe haven of the last decade by a country mile, turning £10,000 into £30,904 in real terms
- £10,000 invested in cash 10 years ago would now only be worth £8,325 after accounting for inflation
- An investment in UK gilts has also lost substantial buying power over the last decade
- A 60/40 strategy has provided very respectable real returns
- Absolute return funds have gone absolutely nowhere in real terms
Laith Khalaf, head of investment analysis at AJ Bell, comments:
“Gold is on an absolutely blistering run at the moment. It’s now cruised through the $5,000 mark when it was only trading at $2,000 an ounce just over two years ago. This raises two pertinent but divergent questions: how high can gold go, and is it close to its peak?
“These questions are extremely difficult to answer, because like its digital counterpart, Bitcoin, there is little in the way of underlying fundamentals to provide a meaningful valuation for gold. Its price is therefore highly driven by sentiment, unpredictable macroeconomic tides, and for technical traders, by pretty shapes on a chart.
“Gold currently has the wind in its sails because of the unstable geopolitical environment, and President Trump’s repeated attacks on the Federal Reserve. Neither of those genies look like climbing back in their bottles any time soon. The huge amount of government debt issuance in developed economies also serves to commend gold as a safe haven, and certainly looking back over the last decade it has totally trounced other alternatives.
“£10,000 invested in gold 10 years ago would be worth £43,198 today, having risen over 50% over the course of 2025 (see table below). After factoring in inflation that £10,000 investment would still be worth £30,904. Of course, that’s easy to see with hindsight and doesn’t mean returns from here are going to replicate gold’s stellar run to date. But when you compare gold’s recent performance to other safe havens, it’s been the clear winner by a country mile.
Safe havens compared: % returns
Safe havens compared: £10,000 invested
Sources: AJ Bell, Bank of England, FE, Morningstar, ONS, total return in GBP to 31 December 2025. Category definitions: 60/40 fund – Vanguard LifeStrategy 60%; Cash ISA savers – average Cash ISA; Gilt funds – IA UK Gilt sector average; Gold – average of three popular Gold ETCs; Absolute return funds – IA Targeted Absolute Return sector average.
Cash is not a risk-free asset
“The average Cash ISA has actually gone backwards over the last 10 years once inflation is factored in. £10,000 invested 10 years ago would be worth just £8,325 today, in real terms. The last decade has included a period of ultra-low interest rates and an inflationary crisis, which have helped push cash savings into the red in terms of their buying power. Perhaps such factors will not be repeated any time soon, but these numbers still provide a salutary lesson in why holding too much cash can open you up to significant inflation risk, especially over longer time periods.
Gilts have suffered from monetary policy tightening
“Gilt funds have also fallen for similar reasons. The transition to higher interest rates was absolutely brutal for gilts, which saw enormous price falls in 2022. Now interest rates have risen and yields are higher, gilts are looking more appealing as a safe haven. That’s especially the case for investors parking money in short dated, low coupon gilts which have a favourable tax treatment.
“There are still risks to the gilt market in the form of high levels of issuance, the threat of sustained above-target inflation, and ructions in the global bond market in both the US and Japan. However, if you buy individual gilts and hold them to maturity, you’re guaranteed your return, except in the extremely unlikely event of the UK government defaulting.
Absolute return funds have gone absolutely nowhere
“Absolute return funds have gone absolutely nowhere in real terms over the last decade. These funds are usually aimed at delivering returns above inflation, but the average fund in the sector has returned -4.2% over the last 10 years. The absolute return sector is extremely heterogenous and so the sector average masks a more nuanced picture of funds which have performed well, and those which are best forgotten.
“But it’s fair to say that as a category absolute return funds have not covered themselves in glory over the last 10 years. These funds often contain both long and short positions, which means investors get less of a tailwind from rising market levels and returns are more heavily dependent on the decisions of the manager, so fund selection is key.
A 60/40 strategy provides a balanced approach
“Occupying the middle ground over the last decade, a 60/40 strategy has performed well, doubling investors’ money in nominal terms, and providing a 44.2% real return. That’s despite a nasty bond rout which hit fixed income allocations when interest rates rose. For many cautious investors a 60/40 portfolio, or a broader multi-asset portfolio, will tick a lot of boxes in terms of balancing risk and long-term returns.
Is gold still the golden ticket?
“Many investors will no doubt now be turning to gold because it has performed so well, but some caution does need to be exercised. Investments that have done so well are often crowded trades and could be due a correction. While gold is often touted as the ultimate safe haven because it’s free from government interference, it is volatile and downdrafts can be painful for investors. Those with a cautious disposition and a low tolerance for losses should take note. Hence a typical balanced portfolio shouldn’t have more than 5% to 10% invested in gold, as a bit of catastrophe insurance alongside stocks and bonds.”
