"Money increased 8 times, but gold only 1.4 times"... The paradox of 'gold' that protects asset value

Over the past 20 years, while the amount of gold held by humanity has increased by approximately 1.4 times, the asset size of the Fed has surged eightfold. As the speed of money supply overwhelms the speed of gold production, the value of gold as a physical asset is being relatively highlighted. Although gold prices are undergoing a correction recently, analysis suggests that from a long-term perspective, gold is a core asset that defends against the decline in currency value.

Nasdaq 16x vs. Gangnam Apartment 2.6x, the gap in returns by asset type

The returns by asset type over the past 20 years analyzed by Park Jong-hoon's Knowledge Remedy showed stark differences. If 100 million won had been invested 20 years ago, investing in the Nasdaq index based on Korean won would have resulted in approximately 1.63 billion won today, recording the highest return. If invested in gold, it would have reached 1.07 billion won, ranking second in returns. This was followed by the S&P 500 index at 820 million won and the KOSPI at 480 million won. Recently, the KOSPI has been undergoing a correction, with returns that once stood at the 700 million won level having declined.

On the other hand, real estate and the domestic market performed relatively poorly. Based on the KB Apartment Index, if 100 million won had been invested in a Gangnam apartment, it would have become 260 million won today. The reason apartment investors achieved higher actual profits was due to the leverage effect of utilizing low-interest mortgage loans and reducing taxes and fees by holding assets long-term. Conversely, KOSDAQ recorded the worst performance, reaching only 130 million won, failing to even keep up with the inflation rate.

However, high-return assets like the Nasdaq come with volatility risk. The Nasdaq undergoes large corrections every 8 to 12 years; notably, during the dot-com bubble in 2000, the index plummeted from 5,100 to 1,100, causing asset values to be slashed to one-fifth. If one had put all their wealth into the Nasdaq, they would have lost 80% of their assets. If one had sufficiently held gold or U.S. short-term treasury bonds during such a bear market, they could have maximized returns by selling those during the downturn to purchase stocks at their lows. In fact, if one had the capacity to invest when the Nasdaq was at 1,100, they could have achieved approximately 26 times the profit based on current stock prices.

Asset value recalculated with gold: Won deposits 'slashed to one-fifth'

When asset value is converted into 'gold' instead of Korean won, the results are even more shocking. If gold is considered as currency and the asset values of the last 20 years are recalculated, the Nasdaq rose 53% compared to gold, while the S&P 500 fell 23%. The KOSPI fell by 55% compared to gold, being cut in half, and Gangnam apartments fell by 76%, showing that their value has effectively dropped to about one-fourth.

The greatest loss was seen in Korean won deposits. As the exchange rate, which was 1,011 won per dollar 20 years ago, has exceeded the 1,300 won range today, Korean won assets have lost as much as 83% of their value when converted into gold. This suggests that the value of the Korean won itself is declining (aging) in the long term. It means that even if time deposits pay nominal interest, the actual purchasing power can be significantly eroded when considering the decline in currency value.

The reason for the rise in gold prices can be found in the difference between the scale of the Fed's quantitative easing and gold production. Over the past 20 years, the Fed's assets increased eightfold, but the amount of gold held by humanity only increased by about 1.4 times, from 155,000 tons 20 years ago to 223,000 tons recently. Although efforts to develop gold mines continue, gold production remains at a level of about 1.7% annually as the discovery of new gold mines slows down. As the speed of money supply far outpaces the speed of gold production, it has become the driving force for gold prices to rise in a manner similar to the increase in the Fed's assets.

A 10% gold weight in the portfolio, a hedge against dollar assets

Despite gold being an asset that does not generate interest or dividends, it serves as an important hedge to respond to fluctuations in the value of the dollar. This is because gold plays a role in reducing portfolio volatility when dollar assets surge or, conversely, when the value of the dollar wavers. In fact, the strategy emphasized since 2019 to include gold at around 10% of a portfolio aims for this kind of risk diversification. The recommended portfolio composition at that time was approximately 50% dollar assets, 10% gold, and 40% Korean won assets, with a significant portion of the dollar assets allocated to the Nasdaq and using U.S. short-term bonds as safe assets.

Recent movements in gold prices have been highly volatile. From 2023 to 2025, gold prices showed a steep upward trend. Gold surged 17% in 2023, 44% in 2024, and a whopping 62% in 2025. However, as of 2026, it is undergoing a correction of about 11%. This is the second-largest correction following the 28% drop in 2013. Like the stock market, the gold market also carries risks as it repeats cycles of rises and falls.

In conclusion, composing 100% of assets in Korean won or putting all eggs in one basket with specific high-return assets can be dangerous in terms of maintaining long-term purchasing power. Considering that the Korean won exchange rate is on a long-term upward trend and that gold prices have risen 10.7 times (in Korean won terms) over the past 20 years, a strategy is needed to prepare for the decline in currency value and protect assets from sudden market volatility by appropriately allocating dollar assets and gold.

Source: original video (YouTube)