Gold just blew past $4,000, and right on cue, the usual chorus erupted:
Gold is useless! It's a pet rock! Just buy SPY—stocks always outperform over time!
Here's the thing about that argument: it's simultaneously true, misleading, and a perfect example of why many investors are fighting the last war instead of preparing for the next one.
Let me explain what I mean.
When You Start the Clock Matters More Than You Think
Ask someone to prove that stocks beat gold, and they'll inevitably pull up a long-term chart showing the S&P 500 crushing gold. Case closed, right?
Not so fast. Let's play with the timeline:
Since 1999? Gold is up over 1,300% (from ~$280 to $4,000+). The S&P is up about 710% including dividends. Gold wins decisively.
Since 2011? After gold peaked at $1,900, it went sideways for years while the S&P ripped higher. Stocks win decisively.
Since 1980? Stocks obliterate gold because you're starting from gold's insane bubble peak at $850.
See the pattern? The "truth" about which asset is superior depends entirely on when you happened to start measuring. That's not a bug in the analysis—it's a feature that reveals something crucial about how markets actually work.
They move in regimes. And the regime that defined the last 40 years might be ending.
The Most Expensive Assumption in Investing
One of the most reliable ways to lose money is assuming the next 50 years will look like the last 50 years. It's recency bias at industrial scale, and even sophisticated investors fall for it constantly.
The past four decades gave us an extraordinary confluence of tailwinds: interest rates declining from double-digits to near-zero, globalization driving margin expansion, the tech revolution, relatively stable geopolitics post-Cold War, and central banks willing to backstop every crisis with freshly printed money. That's not a normal baseline—it's an aberration.
Now consider what we're potentially entering: rates staying structurally higher, deglobalization reversing supply chain efficiencies, resource constraints bumping up against energy transition demands, geopolitical fragmentation, and central banks constrained by persistent inflation concerns.
Strip away the assumption that 1982-2022 was "normal," and suddenly a lot of conventional wisdom starts looking shaky.
What Gold at $4,000 Is Actually Telling You
Let's be clear about what the numbers actually show. Gold rallying past $4,000 isn't about gold being "expensive" or "cheap"—it's a signal about regime change.
Gold doesn't care about earnings multiples, innovation, or productivity growth. It's a vote of no confidence in the people managing the printing press. When gold rips higher while central banks insist everything is under control, pay attention.
What's it telling us now?
Fiscal deficits are out of control and nobody's even pretending we'll fix them anymore. The U.S. is running trillion-dollar deficits during economic expansion—something that would have been unthinkable a generation ago.
Real rates aren't as attractive as they look. Sure, 10-year Treasuries yielding 4-5% sounds great compared to 2020. But factor in actual inflation (not the massaged CPI, but what you're paying for food, insurance, and housing), and suddenly those yields look a lot less compelling.
Central banks are diversifying away from pure dollar reserves. China, Russia, and increasingly other nations are buying gold aggressively. That's not random—it's a structural shift in how the global monetary system operates.
Currency debasement is the path of least resistance. When debt becomes unsustainable, governments have three options: default, austerity, or inflate it away. History shows which one they choose every single time.
The Question Nobody's Asking About Risk
An investment returning 8% with 15% volatility is not the same as one returning 12% with 40% volatility. The latter will destroy you psychologically long before you capture those theoretical returns. Yet people constantly ignore this when comparing assets.
Measuring an investment purely by returns is only half the picture. You must also ask what level of risk was taken to achieve those returns.
Consider gold's behavior during actual crises:
- 2008 financial crisis: Down modestly, recovered quickly while stocks were cut in half
- 2020 COVID crash: Initially sold with everything, then rallied as uncertainty persisted
- 2022 rate shock: Held up better than bonds—the supposed "safe" asset that lost 20%+
Meanwhile, the S&P 500's crisis behavior:
- 2000-2002: Down 49%
- 2007-2009: Down 57%
- 2020: Down 34% in one month
- 2022: Down 25%
Yes, stocks have delivered higher long-term returns. They've also delivered gut-wrenching drawdowns that cause real human beings to capitulate at precisely the wrong moment. The theoretical buy-and-hold return is meaningless if you panic-sell at the bottom—and most people do.
Here's what makes gold interesting from a portfolio construction perspective: correlation. When stocks crater, gold typically doesn't. Sometimes it rises. That's worth something—not because gold has spectacular standalone returns, but because it zigs when equities zag.
A 90/10 stocks/gold portfolio might have slightly lower returns than 100% stocks over multiple decades. But it likely has meaningfully better risk-adjusted returns, smaller maximum drawdowns, and most importantly—it's actually holdable during a crisis without making you want to vomit every time you check your account.
The Double Standard Nobody Mentions
Here's where it gets truly disingenuous: plot SPY versus GLD and everyone screams about gold being useless. But nobody makes the same comparison with bonds or real estate. Why not?
Let's run those numbers since 2000:
10-Year Treasuries: Roughly 4-5% annualized, got massacred in 2022-2023
S&P 500: About 7-8% annualized with dividends (710% cumulative)
Gold: About 11% annualized (1,300%+ cumulative)
So if we're using "total return versus SPY" as the test for whether an asset is useful, bonds fail spectacularly. Yet every financial advisor on the planet still recommends bonds. Why? Because that's not actually what bonds are for.
The same logic applies to real estate. Most people's houses have appreciated, but factor in maintenance, property taxes, transaction costs, and the fact your equity was leveraged 5:1, and the apples-to-apples comparison gets messy. Yet nobody says "real estate is useless, just rent and buy VOO."
Gold gets singled out for special mockery. And that tells you something.
Why Gold Threatens the Narrative
Bonds fit neatly into Modern Portfolio Theory. They're the "safe" ballast to your "risky" stocks. Financial advisors can draw efficient frontiers. Everyone's comfortable with the story.
Real estate is the American Dream™. It's tangible, it's where you live, and even if it underperforms stocks, nobody feels stupid owning their home.
But gold? Gold is a referendum on whether the people running the money printer can be trusted. It's a vote of no confidence in central banks, deficit spending, and currency stability.
That makes people uncomfortable—especially the financial industry that profits from keeping everyone fully invested in financial assets they can manage and collect fees on.
What Each Asset Actually Does
Strip away the rhetoric and here's the honest assessment of what these assets bring to a portfolio:
Stocks: Your growth engine and wealth creator. But prepare for gut-wrenching volatility and the psychological torture of sitting through 50% drawdowns.
Bonds: Income and supposed stability. Except when inflation or rate shocks blow them up. Remember when the "safe" asset lost over 20% in 2022?
Real Estate: Tangible asset, inflation hedge, forced savings mechanism via mortgage. But illiquid, geographically concentrated, and expensive to maintain.
Gold: Insurance against currency debasement and geopolitical chaos. No yield, volatile, but uncorrelated to stocks in crises.
None of these is "useless." They serve different purposes at different times. The question isn't which one has the highest standalone return—it's what they do together in a portfolio, across different market regimes.
The Regime Change Nobody Wants to Acknowledge
We've been trained by 40 years of declining rates to think "risk" means short-term volatility. We Sharpe-ratio-optimize our portfolios assuming stocks always recover quickly and bonds always provide ballast.
That works brilliantly...until it doesn't.
What if the real risk isn't volatility, but permanent capital impairment? What if we enter a prolonged period where stocks go sideways for a decade (like 2000-2010) while inflation erodes purchasing power? What if bonds stay underwater in real terms because rates don't collapse back to zero?
In that scenario, gold's "terrible returns" start looking pretty reasonable. Not because gold went up spectacularly, but because it preserved purchasing power while financial assets marked time.
The fact that gold is at $4,000 while central banks are buying it aggressively, fiscal deficits are exploding, and geopolitical tensions are escalating suggests we might already be in that regime shift. By the time it becomes obvious to everyone, you've already missed the move.
What This Means for Your Portfolio
Investors should not only ask "What returned the most over the past 40 years?" They should also ask:
- What's the maximum drawdown I can stomach without capitulating?
- What's the correlation structure of my portfolio during actual crises?
- Am I getting compensated for the risks I'm taking?
- What happens to my assets in different regimes?
The S&P 500 has been a phenomenal bet for four decades. But it required sitting through multiple 50%+ drawdowns, having the stomach to hold through crashes, and benefiting from an extraordinary tailwind of falling rates and expanding multiples.
The question isn't whether stocks beat gold from 1982 to 2025. The question is: what regime are we in now?
Maybe gold at $4,000 is expensive. Maybe it pulls back to $3,000. I don't know, and neither does anyone else. But dismissing it as a "useless pet rock" misses the entire point of what diversification actually means.
It's not about finding the single best-performing asset. It's about building a portfolio that survives different environments without forcing you to make panicked decisions at the worst possible moment.
When the music stops—and it always does eventually—you'll want to be holding something other than promises from central bankers who've never seen the movie before.
Better to be roughly right than precisely wrong.
