FYI: From 1836 to 2011, gold’s average annual real rate of price change is 1.1%, the standard
deviation is 13.1%, and the covariance with consumption growth is negligible. Therefore, gold’s
expected real rate of return should be close to the risk-free rate around 1%. These properties
accord within an asset-pricing model in which ordinary consumption and gold services are
imperfect substitutes if the elasticity of substitution between gold services and ordinary
consumption is high. In this scenario, the bulk of gold’s expected return corresponds to an
unobserved dividend yield, and a small part comprises expected real price appreciation.
Regards,
Ted
http://isites.harvard.edu/fs/docs/icb.topic1396111.files/Gold Returns Barro Misra Oct2013.pdf
