Beyond The Shine: The Enduring Case for Gold in Your Portfolio
The comments below are an edited and abridged synopsis of an article by Alex Shahidi, Forbes Finance Council
Gold as A Long-Term Investment: Strength, Stability, and Strategic Value
Gold’s strong performance in recent years has drawn widespread attention, but its appeal runs far deeper than short-term gains. Since the US ended the gold standard in 1971, gold as a long-term investment has proven remarkably resilient, delivering annualized returns of 8.4%—just behind global equities at 9.2%. Notably, since 2000, gold has outperformed equities, posting 10.1% annual returns compared to 5.9% for global stocks.
What makes gold as a long-term investment so compelling is not just performance, but its ability to diversify portfolios. Historically, gold’s correlation with equities has hovered near zero, meaning it often moves independently of the stock market. During the worst decades for equities—like the 1970s and 2000s—gold thrived. Conversely, it underperformed during equity booms, making it a natural hedge. A portfolio split evenly between global equities and gold, rebalanced annually, would have delivered stronger, more stable returns over the last five decades.
Perhaps most compelling is gold’s reliability during market downturns. In six out of seven major global stock bear markets since 1970, gold posted positive returns, averaging gains of 17%. Its lone exception came in 2022, when it slipped just 9%. These numbers underscore gold’s value as a safe-haven asset—especially when market volatility spikes or geopolitical tensions flare.
Another pillar of gold as a long-term investment is its role as an inflation hedge. In environments where money printing, rising debt, and currency debasement weaken fiat currencies, gold offers a reliable store of value. This function is especially relevant today, with mounting fiscal imbalances across major economies.
Gold’s accessibility and liquidity further enhance its appeal. Whether held in physical bullion, ETFs, or mutual funds, gold is easily tradable in virtually any market environment. This makes it a practical choice for both short-term strategy and long-term wealth preservation.
Central banks have also recognised the value of gold. In recent years, they’ve dramatically increased their holdings—especially in emerging markets—to reduce reliance on the US dollar and insulate national reserves. This sustained institutional demand adds a layer of support to the gold price and reinforces confidence in gold as a long-term investment.
While cryptocurrencies are often compared to gold, their volatility, speculative nature, and shorter track record differentiate them. Gold, by contrast, has served as a trusted store of wealth across civilizations for thousands of years. Its broad demand base—spanning jewelry, investment, and central banks—offers a stability cryptocurrencies cannot yet match.
That said, gold is not without risks. It doesn’t produce income, can be more volatile than stocks, and is notoriously difficult to value. Still, these drawbacks are often outweighed by its strategic benefits—especially for investors seeking diversification in uncertain times.
In conclusion, gold as a long-term investment stands on firm historical footing. Its consistent returns, safe-haven status, and institutional support make it a powerful tool for portfolio diversification. In a world of rising risk and declining trust in fiat currencies, gold offers a timeless and proven alternative for preserving wealth.
