Is Gold Safe?

February 08, 2021

You might have the perception that gold is safe. Certain late-night commercials definitely give that impression. While gold represents safety and security, the stock market represents risk and uncertainty.

There are a lot of reasons for this. One being that gold is a physical asset that you can hold with your hand with all its hue and heft. On the other hand, the stock market feels elusive--like magically moving numbers on a ticker or your monthly statement. Stocks, it seems, are for white collar suits. Gold is for the blue-collar worker.

Furthermore, empires may come and go, but gold seems to last forever. It is the most mentioned metal in the Old Testament since biblical times1, and was used as currency in coins as early as the seventh century B.C2. The US Stock market is a blip in comparison to gold's history. 

I’m not here to debate the merits of one or the other in your overall investment plan. You should sit down with a trusted financial advisor to discuss that. I simply want to look at it in terms of volatility. And let’s face it: both the stock market and the price of gold can fluctuate dramatically.

For example, this below chart shows the price of gold in US dollars versus the S&P 500 index (approximately 500 of the biggest US publicly traded companies). One could have bought gold 10 years ago and its price would have dropped around 44% off its high price along the way. Similarly, holding an investment in the S&P 500 would have had a third knocked off its high price in the last 10 years. 

How about since 1980?

Clearly some mountain peaks and deep valleys for both gold and stocks.

The argument here isn’t whether one should be in one or the other. It’s simply to understand what you are getting into.

Stocks aren’t considered a "safe haven" asset and I'm not saying they should be; however, gold is often referred to in that way. What you need to know is that this “safe haven” could be sold for a lot higher or lower or anywhere in between from the price you paid for it.

So, is gold safe? Let's not opine on that. Just know: it's definitely volatile.



1. Patch, J. A. (1915). Gold. In J. Orr, J. L. Nuelsen, E. Y. Mullins, & M. O. Evans (Eds.), The International Standard Bible Encyclopaedia (Vol. 1–5, p. 1274). Chicago: The Howard-Severance Company.

2. "The Importance of the Lydian Stater"