Occasionally, clients will ask if they should own gold. Because the price almost doubled in 2025, the frequency of those questions has increased.
There are a few reasons people believe gold is worth owning. It’s supposed to protect you if a currency loses its purchasing power, meaning that gold should do better when inflation is higher. It’s supposed to be less volatile than stocks because, while company earnings fall in a recession, gold will always be a “store of value”. It’s been around forever, unlike companies (and the stocks they issue) or governments (and the bonds they issue).
In our view, the truth is different. Gold is just another speculative investment. One of the main reasons: unlike stocks or bonds, gold has no inherent value. A stock has value because it is a claim on a company’s future profits. A bond has value because it will make a regular interest payment, from company profits or government tax collections.
The chart below illustrates the volatility of gold.
In the 1970s, gold skyrocketed after Nixon officially decoupled the US dollar from gold. Inflation soared and geopolitical uncertainty was higher than normal. Gold went from about $35 per ounce to over $650. But in less than 5 years, it lost half its value – and it took almost 25 years to return to its previous high. That’s not exactly a store of value.
Gold’s next big run was in the early 2000s, going up almost 10 times to a new peak in 2011 of almost $2,000 per ounce, as the world suffered through the global financial crisis. But within a few years, the price had dropped by almost 50%. Again: not exactly a store of value.
We’ve just seen the third big run-up in this modern era, with gold doubling in 2025. And then in 2026? Year-to-date, gold is down 25%. I repeat: not exactly a store of value.
If you take a long-term view, gold has done well during the period when the price has floated freely (55 years): 9% annual growth. Of course, if your money had been in the S&P 500 during that time, it would have been worth three times as much with less volatility along the way, but gold has still done well.
But would you really take a long-term view? Would you hold gold for a generation of no appreciation, while stocks and other investments generated wonderful returns? While no one was recommending gold? While it became an ever-smaller percentage of your portfolio – in short, when it was easy to sell and move on? And don’t forget that, unlike stocks or bonds, gold pays no dividend or interest – not a bit of cash flow to tide you over while you wait for the value to rise.
If you want to buy gold as a diversifier, maybe that makes sense on a very long-term horizon. But understand what you are buying: an investment which produces no income and has little real-world utility, which can easily lose 50% of its value, or languish for many years, before it generates a return. Talk about an investment that requires patience.
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