Gold and bitcoin have emerged through the cost of living crisis as clear winners after soaring inflation left investors mulling over where to place funds, analysts say.
Three years after living costs began to surge with inflation, AJ Bell said gold had trumped all other investments, as the likes of saving accounts generated negative real returns.
“Since the cost of living crisis began it’s clear that some investments have helped investors grow their wealth in the face of rising inflation,” analyst Laith Khalaf commented.
“Others have capitulated in its presence,” he added.
Gold generated a 50% nominal return since consumer prices began to spike in August 2021, when inflation sat at 3.1%, AJ Bell noted.
In real terms when accounting for inflation, returns reached 24.8%, with the precious metal benefitting on the back of geopolitical tensions and central bank buying action.
Bitcoin’s 19% real return saw it take the second spot as the among cost of living winners, which, despite “wild” volatility historically, may have been used as an inflation hedge by some, analysts continued.
Equities fared well too, with an investment in a global index tracker having racked up a 5.4% real return since August 2021 and the FTSE 100 ticking up 5.3% in real terms.
For the FTSE 100, AJ Bell acknowledged oil and gas heavyweights had benefited from higher energy prices in the wake of Russia’s invasion of Ukraine, which itself helped fuel the spike in living costs.
A Shell PLC (LSE:SHEL, NYSE:SHEL) investment from August 2021 would have generated a 78.8% return in real terms, for instance.
Defence firms BAE Systems PLC (LSE:BA.) and Rolls-Royce Holdings PLC (LSE:RR.) performed even better though, adding 105.5% and 269.3% in real terms respectively, with these no doubt aided by rising global tensions, but also a rapid strategic turnaround from the latter.
Instant savings accounts, on average, then sat among the worst investments of the past three years, according to AJ Bell, losing only to gilts, which lost over a third of value in real terms.
Though subsiding inflation means savers may now be enjoying above-inflation rates, AJ Bell explained these had been slow to rise as base interest climbed on the back of a jump in inflation to a peak of 11.1% in October 2022.
Such accounts have generated a negative 12% return in real terms as a result, “as even the most competitive current rates wouldn’t have hurdled” high inflation, Khalaf added.