All that glitters ...
The superstar asset outperforming the S&P 500
🥇 Did you know that Gold has outperformed the S&P 500 over the past 25 years?
$10,000 invested in Gold vs S&P 500
Jan 2000 - Apr 2025 | Gold | S&P 500 (Vanguard 500 Index Fund) |
|---|---|---|
End Balance | $104,085 | $58,961 |
Annualized Return (CAGR) | 9.69% | 7.25% |
Worst Year | -28.33% | -37.02% |
Source: Portfolio Visualizer. Past performance is not a guarantee or indication of future returns.3
While the S&P 500 has taken the spotlight over the past few decades, Gold’s performance has been less celebrated. Most investors chase the S&P 500. Very few allocate an appropriate amount to Gold in their portfolios.
Read on to find out why Gold could be a valuable addition to your portfolio.
💰️ A wealth preservation tool for the ages
Gold has been reliably used to store and preserve wealth for thousands of years.
Gold has historically exhibited three major characteristics that make it a compelling addition to modern portfolios
Protection from inflation
Performance during market turmoil
Low correlation to stocks
Let’s look at them below.
🛡️ Protection from inflation
Gold has built a strong reputation for protection against inflation. Gold prices tend to keep up with the cost of living.
Gold has historically delivered its best performance during periods of extreme inflation (> 5%).
From 1971 - 2025, Gold delivered solid returns during high inflationary periods (inflation > 5%), significantly outperforming US stocks and Treasury Bonds.
Source: Bloomberg Finance L.P., State Street Global Advisors. Data from August 31, 1971 to March 31, 2025. Past performance is not a guarantee or indication of future returns.1,4
Note: During periods of low to moderate inflation (< 5%), Gold’s performance was not as stellar, although it still provided protection & moderate growth.
📈 Performance During Market Turmoil
During periods of market stress, Gold has historically served as a safe haven. Investors have fled to Gold during times of extreme fear.
The chart below shows Gold’s performance during major crises (financial, geopolitical, health-related & economic).
Gold generated positive returns during extreme market conditions in a majority of these crises. Even when its performance was negative, it outperformed US stocks, thereby reducing portfolio losses and improving long-term performance.
Source: Bloomberg Finance L.P., State Street Global Advisors. Past performance is not a guarantee or indication of future returns.1
🧑🤝🧑 Low correlation to stock market returns
Over the past 30 years, Gold has exhibited a near zero correlation to the S&P 500.1 Simply put, Gold delivered returns that were not tied to the US stock market.
This makes gold a valuable asset for diversifying your wealth and reducing risk.
Gold’s low correlation is vastly superior to that of other asset classes such as PE (Private Equity), REITs, Hedge Funds, etc that are often hyped up as ‘alternative investments’ or ‘alternative diversifiers’.1
🏗️ How to invest in Gold?
You can of course buy Gold at Costco, if that’s your thing. However, the GLD ETF is a cost-effective and easy way of investing in Gold through your brokerage account.
⚠️ A word of caution
No investment is without risk. Gold is subject to its own quirks. It has often undergone years of stagnation & deep drawdowns. It is especially prone to underperformance during strong economic cycles.
As an example, from 2012 - 2019, a period of strong economic growth, Gold underperformed significantly, returning -0.77% annualized.2,3
Investors that kept the faith, and stayed invested in Gold were well rewarded for their patience.
Over the next 5+ years (Jan 2020 - Apr 2025), Gold returned 15.19% annualized, beating S&P 500’s performance of 12.33%.2,3
This period was marked by high inflation and significant market turmoil, giving Gold an opportunity to shine.
The key to long-term investing success is often patience coupled with a deep understanding of what you are investing in.
Sumeet Ganju Sumeet Ganju is the founder of InverseWealth, a fee-only fiduciary RIA, where he helps tech operators and founders turn concentrated equity into lasting wealth. He writes here most Sundays.