Gold: an enrichment for troubled times

I have developed a brand new technique to beat the stock market. All you’ve gotten to do is own gold. Because gold has outperformed global stocks for UK investors during the last 30 years!

Surprised? Check out the annualized returns:

Data from The London Bullion Market AssociationAnd MSCI. February 2026. All returns quoted in this text are inflation-adjusted total returns (GBP).

Gold has destroyed stocks by 4 percentage points per yr over the past five years. Although that is a bit short-term for my taste, how about 2.5 percentage points per yr for 20 years?

That’s lots. It looks like this:

Admittedly, the difference in returns is marginal whenever you look back 30 years: 6.1% gold in comparison with 6% stocks. But gold still has the sting.

Plus, it has been an amazing yr thus far!

If the value of gold continues to rise or the so-called AI bubble bursts, the lead of the yellow metal will spread further into the historical record like an ink stain running through paper.

How long is the long-term term?

By the standards of the common mortal investor, 30 years is a fairly compelling time horizon. It actually feels like an extended strategy to go for an asset to have the whip hand, doesn’t it?

Don’t these numbers also challenge the story that gold is basically a shiny Ponzi scheme?

Well, I believe this view is simply too dismissive. I consider gold deserves its place in our portfolios.

But in my view, the long-term performance numbers above are more misleading than clarifying.

It’s not because gold outperforms stocks that it’s useful. That’s since it all the time involves the rescue when stock investors are desperate.

Even in times of uncertainty not unlike those we’re currently experiencing, gold tends to perform well…

Golden years

First, nonetheless, it must be noted that gold returns depend heavily on the chosen start date, which clouds the situation to no end.

Here are three sensible long-term bases for comparing gold to other assets:

​​Inflation-adjusted annual total return (GBP).

If I desired to press The case against gold Then I might cite the 126 yr period above and never mention that the value was heavily regulated before the shackles finally got here off in 1975.

On the opposite hand, if I were a complete gold fan Then I might shout that gold and stocks have been neck and neck for 56 years.

However, in the event you select the compromise date of 1975, order is restored. Gold has some value as a minor diversifier, while stocks remain paramount.

But their relationship is definitely more complex—and, for investors, a fortuitous one.

Pure doubloon

Next on the table is the 31-year mega gold decline:

The price of gold fell by 78.3% within the 19 years from 1980 to 1999. Buyers, attracted by gold’s 77.6% rise in 1979 (98% nominal!), didn’t break even again until 2011.

This loss puts a major strain on gold’s track record. It distorts the common yields around it, just as a black hole bends light.

So if I select a long-term comparison date that is simply too near this event horizon, then gold looks weak.

On the opposite hand, gold’s average return increases when observed at a sufficient distance from the supermassive, scary thing pushing for the investment of space-time.

Both results are true relative to the observer – as the subsequent graphic shows:

Trend lines show inflation-adjusted cumulative total returns (GBP) to December 31, 2025.

A gold investor who went all-in on New Year’s Eve 1979 (green line) wouldn’t be as lucky as one who entered the market on New Year’s Eve 1969 (yellow line). Meanwhile, Mr. New Year’s Eve 1999 (purple line) would still be celebrating like Prince yourself.

The result? Your entry point is vital – as I believe The Purple One knew all too well.

The green line is the trail of the performance hunter who collected gold near his peak in 1980. Notice how this sucker was hit by the mega decline in gold prices in the primary 20 years. The recovery only begins at the top of 1999. Finally – greater than 25 years after the comeback began – Mr Green can look back on an annual return of two.4%.

In contrast, the yellow line experiences a decade of growth before giving up most (but not all) of its early gains to the 1980-1999 abyss. 1 / 4 of a century later, Colonel Mustard, or whoever he’s, has come through all of it and delivered a really respectable 4.8% annual return.

After all, for the red line investor, gold’s galactic collapse is only a historical curiosity. For them it just keeps going, all of the strategy to a sparkling 8.8% annual return.

Of course, the returns of any asset are path dependent. But the outcomes in terms of gold prices might be particularly different. This helps explain why gold ownership is so controversial and why some are fanatical and others indifferent.

In short, because of this gold tastes like Marmite.

Crisis management

The next chart shows more clearly why gold is value owning (I hope). See how the yellow line zigzags when stocks get jagged:

Both gold and stocks are volatile as hell. In addition, they’re extremely careless: they lose many years in all places in the shop.

But for over half a century they’ve balanced one another remarkably well.

In fact, nothing else has been as effective at offsetting stocks’ worrying habit of going nowhere for years as gold.

Meanwhile, stocks typically rally when gold prices fall.

Here are the lost many years numbers for every asset shown within the table above:

​​Gold counteracts stock losses, stocks counteract gold. Inflation-adjusted cumulative total return (GBP).

Gold returned 144% when stocks traded sideways for 12 years from 1972 to 1984. During this era, stock losses were -56% in April 1980. However, at the identical time, gold rose 191.5%.

The remainder of the table repeats the identical story. You can see stocks offsetting gold’s peak losses and vice versa. (Stock declines are shaded within the table, but gold is just not. Peak loss recovery is the equivalent gain when the “lost decade” asset experiences its worst loss.)

Driven to extraction

As the ultimate table shows, gold disproves the old market adage that every one correlations “go to one in a crisis.”

Obviously, gold comes with lots of problems. But fortunately, stocks can assist you to overcome them.

Of course there are not any guarantees. Gold wasn’t the perfect diversifier throughout the dot-com bust. Even throughout the global financial crisis (GFC), it initially fell by 30% before finally responding to the alarm call.

At some point there’ll almost inevitably be a financial catastrophe, with gold and stocks collapsing.

Therefore, I’m not advocating converting the 60/40 portfolio right into a 60/40 split between stocks and gold. But I’m saying that gold, alongside more traditional companions like bonds and money, can play a solid role in smoothing the returns of a well-diversified modern portfolio.

And yet I still have my reservations…

Yellow alert

If you take a look at the assets in your portfolio in isolation – reasonably than as a part of a balanced team – gold might be difficult to live with. Not now, when there are gangbusters, but every time things stop shining next time.

That time will likely come soon because gold is shockingly volatile, as we saw within the chart above. It’s a good greater rollercoaster than stocks.

For example, from 1970 to 2025, 39% of gold’s annual returns were negative. In contrast, for stocks it was only 28% of the years.

Additionally, as of July 2011, gold spent 31 years underwater. It then rose to latest highs for 3 months before diving back into the red – where it stayed for one more nine years!

Essentially, gold was underwater for over 39 years between 1980 and 2020. (Paradoxically, the day was saved throughout the global financial crisis. So again, it depends upon whenever you shopped.)

In conclusion, owning this barbaric relic is much more painful than owning world stocks as a standalone asset. If you can not bear to have your patience tested, then ignore owning the yellow metal.

However, in the event you’re willing to carry an asset for its strategic value – versus extremely uncertain short-term gains – it’s best to consider investing a few of it in gold.

So metal

I conclude with the newest installment in a series through which Warren Buffett said in a couple of sentences 20 years ago what I can barely say in a thousand words today.

Here’s a beautiful one Gold quote from the old maestro, who sums up the dilemma:

Gold is a strategy to go long on fear, and it has been a fairly good strategy to go long on fear once in a while. But you actually must hope that in a yr or two people shall be more afraid than they are actually. And in the event that they are more afraid, you become profitable, in the event that they are less afraid, you lose money, however the gold itself produces nothing.

I totally buy that. From the last chart you may see that gold soars during times of great turmoil, when confidence within the system itself collapses: the oil crisis of 1973-74 Second oil crisis of 1979, the worldwide financial crisis, and an in depth relative of the European sovereign debt crisis.

This brings us to the present era of instability, which some call a polycrisis. (Sounds more like a depressed parrot to me.)

If you think we’re moving towards an age of peace, prosperity and political harmony, then gold must be unnecessary. But personally, I wish to allocate 10% of my portfolio to fear.

Finally, it looks as if fear often takes over:

Be calm,