Beyond The Shine: The Enduring Case For Gold In Your Portfolio
Alex Shahidi, JD, CFA®, CFP®, ChFC®, CIMA®, is a Managing Partner and Co-CIO at Evoke Advisors, and Host of The Insightful Investor Podcast.
Gold’s impressive performance in recent years has captured headlines, but its true story stretches much further back. Since 1971, when the U.S. came off the gold standard, the precious metal has delivered strong, competitive returns, nearly matching global equities over the long term, with annualized returns of 8.4% compared to 9.2% for global stocks, according to my personal calculations using Bloomberg sourced data.
Notably, since the turn of the millennium, gold has significantly outpaced equities, delivering 10.1% annual returns versus just 5.9% for global stocks, by my calculations. This remarkable track record highlights gold’s enduring value as an investment, especially in the modern era.
Gold As A Portfolio Diversifier
Gold’s value as a portfolio diversifier is often overlooked. Its average correlation with equities since 1971 has been near zero based on my analysis, meaning gold’s returns have often moved independently from stocks. Notably, I found that gold’s best decades (the 1970s and 2000s) coincided with the worst decades for equities, and its worst decades (the 1980s and 1990s) aligned with the best decades for equities. According to my estimates, a balanced portfolio of 50% global equities and 50% gold, rebalanced annually, would have outperformed either asset class alone over the past five decades with less risk.
My calculations show that during the seven major bear markets for global stocks since 1970 (defined as peak-to-trough declines of at least 20%), gold delivered positive returns in all but one instance, averaging a gain of 17%, with the only exception being a 9% decline in 2022.
Gold As An Inflation Hedge
Gold is a proven inflation hedge, particularly in environments marked by aggressive money printing and currency debasement. When government debt and fiscal deficits are high, as seen in many major economies today, fiat currencies—including the U.S. dollar—can come under pressure. In such times, gold’s role as a store of wealth becomes even more valuable, helping investors protect purchasing power against inflation.
Safe Haven In Times Of Crisis
Gold often serves as a safe haven asset, providing stability during periods of economic uncertainty, geopolitical stress or major market corrections. This was evident during the global financial crisis (GFC), the Covid-19 pandemic and most recently in 2025, when gold’s price rose as investors sought security amid market turmoil. Gold’s ability to retain its value and even appreciate during such events underscores its importance as a stabilizing force in investment portfolios.
Liquidity And Accessibility
Gold is a highly liquid asset that is traded globally and accessible through various investment vehicles such as physical bullion, ETFs and mutual funds. This liquidity makes gold a practical choice for investors seeking both short-term and long-term exposure, and it can be bought or sold quickly in virtually any market environment. The fact that it doesn’t produce any income can also make it tax-efficient when held over the long term.
Central Bank Activity
Central banks have become major players in the gold market, dramatically increasing their holdings from the previous decade. Central banks, particularly in emerging markets, are buying gold to diversify reserves, hedge against inflation and reduce reliance on the U.S. dollar. This sustained central bank demand could potentially provide consistent support for gold prices and could reflect a fundamental shift in global reserve management.
Comparison With Cryptocurrencies
While both gold and cryptocurrencies are seen as alternatives to fiat currencies, there are fundamental differences. Gold’s demand is more diverse and less speculative, and gold has served as a store of wealth for thousands of years across cultures and civilizations. In contrast, cryptocurrencies have a much shorter track record, greater regulatory risk and more concentrated ownership, leading to much higher volatility. As a result, gold is generally considered a more reliable safe haven and stabilizer in portfolios.
Risks And Considerations
Despite its strengths, gold does have drawbacks. By my calculations, it has historically been about 25% more volatile than stocks, and its price can be unpredictable in the short term. After several years of strong returns, the risk of a near-term correction may be elevated. Gold also does not generate dividends, interest or revenue, making it difficult to value and assess whether it is over- or undervalued at any given time.
Additionally, gold remains an unconventional holding for many institutional and high-net-worth investors, who may underestimate its historical returns and diversification benefits. As a result, including gold in a portfolio can set investors apart from their peers and may invite criticism during periods of underperformance.
Final Thoughts
Gold is more than just a shiny metal. With its surprisingly strong historical returns over the long run, high liquidity and strong central bank support, it can be a valuable portfolio tool that offers diversification, inflation protection and stability during market turmoil. While not a conventional holding for all investors, gold’s unique attributes and proven track record make it worth considering as part of a well-diversified investment portfolio.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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