Is gold a good long-term investment?

Over very long periods (50+ years), gold has roughly kept pace with inflation but dramatically underperformed stocks. The S&P 500 has historically returned about 7% per year after inflation, while gold has returned roughly 1% after inflation. Gold produces no dividends or earnings — its entire return depends on price appreciation.

Should I invest in gold or the stock market?

For long-term wealth building, stocks have dramatically outperformed gold. A dollar invested in the S&P 500 in 1971 would be worth far more than a dollar invested in gold over the same period, even though gold had spectacular decades. Gold is better suited as a small portfolio hedge (0-5%) rather than a primary investment.

Is gold a good hedge against inflation?

Gold is a hedge against extreme inflation and currency collapse, but not a reliable hedge against normal 2-3% inflation. From 1980-2000, gold lost significant purchasing power while inflation continued at moderate levels. TIPS (Treasury Inflation-Protected Securities) and I-bonds are more reliable inflation hedges for normal conditions.

What is the best way to invest in gold?

If you want gold exposure, low-cost gold ETFs (like GLD or IAU) are the most practical option. Physical gold has storage costs, insurance costs, and selling hassles. Gold mining stocks add company-specific risk on top of gold price risk. Avoid gold dealers who charge enormous premiums on coins and bars.

When does gold actually perform well?

Gold tends to outperform during periods of: (1) high or accelerating inflation, (2) negative real interest rates, (3) geopolitical instability and war, (4) currency devaluation, and (5) loss of confidence in governments/central banks. It works as crisis insurance, not a wealth builder.

Myth Busting

Is Gold a Good Investment?

Gold bugs will hate me for this. But the data doesn't care about your feelings — or your stack of gold coins in the safe deposit box.

Gold vs Stocks Growth Comparison

Initial Investment

Time Horizon

years

Gold Annual Return

~1% real historical avg

Stock Annual Return

~7% real S&P 500 avg

The Cost of Gold vs. Stocks Over 30 Years

$63K

Gold

$13K

Stocks

$76K

Based on 1% gold return and 7% stock return (inflation-adjusted). Past performance does not guarantee future results.

Gold vs Stocks by Era

Gold shines during specific crises. Stocks dominate the rest of the time. The problem? You have to be invested before the crisis, and you don't know when it's coming.

1971-1980 (Gold's Best Decade)

Gold Wins

Gold

~1,400%

Stocks

~77%

Nixon ended the gold standard. Inflation raged. Gold went from $35 to ~$850/oz.

1980-2000 (Gold's Lost Two Decades)

Stocks Win

Gold

Roughly flat (peaked at $850 in 1980, was ~$270 by 2001)

Stocks

~1,200%+ (S&P 500)

Gold crashed after the 1980 spike and went sideways for 20 years while stocks boomed.

2000-2011 (Gold's Revenge)

Gold Wins

Gold

~600%+ ($270 to ~$1,900)

Stocks

Roughly flat (dot-com crash + 2008 crisis)

Two stock market crashes made gold shine. Financial crisis drove flight to safety.

2011-2024 (Stocks Dominate Again)

Stocks Win

Gold

Modest gains with volatility

Stocks

~300%+ (S&P 500 bull run)

Longest bull market in history. Low inflation. Gold had nowhere to hide.

Approximate returns based on commonly cited financial data. Individual results varied by exact entry/exit dates.

Gold Myths vs Reality

Myth

Gold is a reliable inflation hedge

Reality

Gold failed as an inflation hedge from 1980-2000 (lost purchasing power while inflation continued). It hedges hyperinflation and currency collapse, not normal 2-3% inflation. TIPS and I-bonds are better inflation hedges.

Myth

Gold is a safe haven in all crises

Reality

Gold dropped ~30% during the 2013 taper tantrum and initially fell during the March 2020 COVID crash. It works as a hedge in some crises (especially currency/inflation crises) but not all.

Myth

Gold always holds its value

Reality

After peaking at ~$850/oz in January 1980, gold didn't surpass that level again until 2008 — 28 years of negative real returns. Adjusted for inflation, the 1980 peak wasn't truly exceeded until the 2020s.

Myth

You should have 10-20% of your portfolio in gold

Reality

Most evidence-based advisors suggest 0-5%. Gold produces no income, no dividends, no earnings. Its only return comes from someone else paying more for it later. That's speculation, not investment.

🪙

Glen's Take

I ran a hedge fund and I never bought gold. Not once. Here's why: gold produces nothing. No dividends, no earnings, no innovation. You're betting that someone will pay more for a shiny metal tomorrow than they did today. Warren Buffett put it best — all the gold in the world could buy every share of every US company, all the farmland in America, and you'd still have trillions left over.

That said, I understand the emotional appeal. When everything is going to hell — when governments are printing money like there's no tomorrow — gold feels safe. And in genuinely extreme scenarios, it can be. But for normal people building wealth over 30 years? An S&P 500 index fund will absolutely crush gold.

If you want gold exposure, fine — keep it to 5% max. Use a low-cost ETF, not physical coins with a 20% premium from some TV ad company.

— Glen Bradford, former hedge fund manager who never touched gold

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More Investment Guides

Analysis

Is Gold a Good Investment?

Gold vs Stocks Growth Comparison

Gold vs Stocks by Era

1971-1980 (Gold's Best Decade)

1980-2000 (Gold's Lost Two Decades)

2000-2011 (Gold's Revenge)

2011-2024 (Stocks Dominate Again)

Gold Myths vs Reality

Gold is a reliable inflation hedge

Gold is a safe haven in all crises

Gold always holds its value

You should have 10-20% of your portfolio in gold

Glen's Take

Frequently Asked Questions

Is gold a good long-term investment?

Should I invest in gold or the stock market?

Is gold a good hedge against inflation?

What is the best way to invest in gold?

When does gold actually perform well?

I Document Every Trade — Even the Losses

Tools & books I actually use and recommend

SeekingAlpha Premium

A Random Walk Down Wall Street

The Little Book of Common Sense Investing

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