With gold making new highs and up more than 50% in 2025 you might be wondering whether it makes sense to hold gold instead of stocks. It’s a good question, but as you can see from the chart below, over the very long term (since 1915) there is really no comparison. The Dow Jones Industrial Average (DJIA) is up more than 88,000%, while Gold is up just over 20,000%.
DJIA (Blue) & Gold (Orange) Since 1915
Over a shorter, but possibly more relevant time horizon, stocks have still outperformed gold. For instance, the chart below shows that over the last three decades, the closing price of the S&P 500 has increased slightly more than the price of gold. However, when total return is measured by taking dividends into account, the performance of the S&P is more than twice that of gold.
The Price of Gold Over the Last 30 Years
Stocks Have Provided 78x More Growth
Thanks to the power of compounding, larger annual returns really add up across the span of decades. For example, here is one more way of looking at long-term returns, this time measured by how much your money would have grown over time. In this example, the table below shows how much money you would have if you invested $100 in 1928:
Growth of $100 (as of July 23, 2025)
And yes, you are reading that chart correctly. Since 1928, stocks have produced approximately 78x more wealth than gold has.
What About Diversification?
Some people might argue that gold isn’t a substitute for stocks, but rather a diversifier that they can hold in addition to stocks. After all, as the charts above and below show, gold has produced higher returns than some other diversifiers such as bonds or cash.
Returns on gold and other asset classes over 30 years
However, while gold can play some role in a portfolio as a compliment to other asset classes and a hedge against potential global shocks, in general, diversifiers should produce income and have modest volatility. Unlike bonds and even cash, gold clearly does not produce income.
On the volatility front, between 1974-2023, Gold experienced an annual decline greater than 10% on eight occasions, with a maximum drawdown of 32%. Government bonds declined by double digits on two occasions, with a maximum drawdown of 17%. And cash never declined by double digits, in fact it never declined at all (though of course the risk with cash is losing purchasing power to inflation.)
The Bottom Line
There are periods where gold performs extremely well, but over the long run stocks have been a more effective creator of wealth. And there are times when gold can act as a diversifier, but gold’s historical volatility makes it tough to rely on as a source of stability. With that in mind, the bottom line is that you do not need to own gold to build a portfolio that creates wealth with an appropriate amount of diversification and stability. But if you do choose to own gold, you should probably do so either as a hedge against geopolitical risks or as a short-term trade, rather than as a substitute for the stocks in your portfolio.
Next Steps:
- Analyze your portfolio to make sure it is aligned with your required rate of return and risk tolerance.
- Review your investment holdings and asset classes to see if there are any others that might enhance your portfolio.
- Take a deeper dive into your overall financial situation using our free Financial Blueprint.
