Gold vs. Stocks Investment

Gold has been considered a safe investment for years. For that reason people have been buying gold for decades; it’s considered one of the best storehouses of value. When the ‘investment craze’ hit the market, stocks were most investors’ first preferred option. This has more to do with the fact that the stock market back then was something new and investors were interested in knowing more about its capabilities. However, over the years they realized gold is a better and safer investment option with higher potential.

Physical gold and stocks have been pitched against each other for decades, and there seems to be a connection between the two. However, the trend keeps on changing and largely depends on the time period we are considering. For example, if we look at the past 45 years, we’ll see that the yellow metal has outperformed stocks and even bonds; however, the past 30 years show that stocks did better than gold. But, looking at the numbers from past 15 years it can be safely concluded that gold has outperformed both stocks and bonds.

Gold Investment Returns

Gold increased over 335% over the past 30 years; in comparison the Fidelity Investment Grade Bond Fund (FBNDX) returned 672% and the Dow Jones Industrial Average (DJIA) gained 1,255% during the same period.

Gold has increased by 315% over the past 15 years. In comparison, the FBNDX returned 127% and the DJIA increased by 58% over the same period, which is lower than the numbers reported over the 30-year period. However, gold’s growth remained steady, while stocks can fluctuate, sometimes wildly.

Let’s look at the numbers since 2001. A look at past figures show that both stocks and gold increased in value for the first five years (2001-2006) but stocks recorded a figure (648%), that was a lot higher than gold’s 92%. This means that investors would have received around seven times more returns if they had invested in stocks instead of gold.

The Future and  Gold Buying

But this situation did not continue for long, as the markets got hit by the Great Recession and stocks fell, increasing only by 39% in the next five years. On the other hand, gold increased by 239%, overshadowing stocks. In comparison, you would’ve received six times greater returns by investing in gold during this period; the opposite of the numbers reported in the previous five year period.

It was during this time that many investors started to look at gold anew, as a safe investment option. When stocks and bonds started to fall due to recession, investors wanted an option that was safe. They bought gold in huge amounts, resulting in a shift that caused demand to increase and hence the higher rate for gold. Conversely, the good thing is that gold has maintained this position since then, instead of falling once the market started to stabilize again.

The figures for 2001-2011 show that gold has increased by 537%, which is an impressive figure, especially when compared to the stock market, which has only given an increase of 7% over the same period.

Last year, gold fell 45% after reaching an all time high. However, 2016 again saw gold increase in value, and with a hotly contested upcoming election it’s once again predicted to gain. On the other hand, stocks are predicted to fall around election time.


“The two assets are considered frenemies with negative correlation,” according to experts at Goldco Precious Metals.


Important Data

Given below are some important numbers that highlight the market situation in the past few decades. They also show how gold has increased over the years.

  • Gold topped the U.S. asset performance table six times in the last 40 years. Two options that ranked better than gold were real estate (11 times) and foreign stocks (9 times).
  • Gold fell to the lowest 10 times, performing worse than any other major asset.
  • Gold has increased +669% in the last 40 years (gross), doing better than inflation (328%), cash (535%), and housing (598%).
  • Gold has consistently ranked in the top 3 best assets since 2000.

One of the most important questions that investors ask if there is a connection between gold prices and stocks. There is usually a negative correlation between the two, meaning when one declines, the other is typically in an upswing.

When stocks begin to fall, investors turn to gold and vice versa.  From 1987 to 2000 there was a negative relation between S&P 500 Index and gold prices. The trend changed in 2000 with the dot-com bubble, and 2001 saw the start of a bull market. The two assets have moved in opposite directions since then. But is there a direct connection between the two? Even though many reports indicate so, most experts tend to agree that there is no direct causal relationship, except for the phenomenon of supply and demand.