Not Everything that Glitters is Gold: 100 Years of Gold Vs. Stocks

August 07, 2023

Not everything that glitters is gold.

Not even gold.

Over the past century, that is.

Gold Vs. Stocks: Since 1928

Corporate finance professor in Stern School of Business at NYU, Aswath Damodaran, lays out the returns of US stocks versus gold through the years. [1]

He shows that if you started investing in gold in 1928 with $100, your gold would be $8,866.76 at the end of 2022.

On the other hand, if the same amount was invested in stocks in the S&P 500 (including dividends)[2], you would have $624,534.55.

100 or so years of history just punched gold bugs right in the kisser.

Gold VS. Stocks: Recent History

What about recent history?

Let’s see what happens if you go out the last 3 decades or so.

Stocks win again.

The above chart makes it clear—$2,440% versus 438%.

Not even close.

Bonds Too

The investment giant, Blackrock, did a piece a few years back, which showed that over the last few decades, another popular asset class outperformed gold.

Wait for it…



If we go back to the NYU professor's data, adding $100 in 1928 to Baa rated corporate bonds would be roughly $46,000 crushing the performance of gold by tens of thousands of dollars over that time frame.

We can give gold a victory lap, though.

It beat US Tbills and Treasury bonds. For example, $100 bucks in Treasury bonds would have earned you about seven grand over the last 100 years and gold would be worth almost nine grand. 

The Unproductive Problem with Gold as an Investment

I heard one person explain that the reason they like stocks over gold is because they don’t believe in magic assets. 

That's a bit too pejorative, but you get the idea.

Warren Buffet put it a bit nicer, kind of:

Gold, however, has two significant shortcomings, being neither of much use nor procreative…. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.[4]

One of the problems with gold in comparison to stocks is that you are not receiving the compounding benefits of dividends over time. While stockholders own shares of companies that often produce a product, seek profits, and sometimes pay dividends to return to shareholders, gold investing is not inherently productive but speculates that the next buyer will give you a better price. 

The Hope of Gold in Times of Fear

Where gold sometimes shines is in times of fear.

While stocks tell an optimistic story about the future, gold tells a pessimistic story about the future.

And stories shape people more than data.

For some, gold seems like a tangible hope secured in metal that is tied to a history that far exceeds the last 100 years and existence of America itself.

Here is Mr. Buffett again:

…gold is a way of going long on fear, and it’s been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in the year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money. But the gold itself doesn’t produce anything.[5]

Uncle Warren is correct. Despite his general disdain for gold throughout his writings and interviews, he admits that it has served as a way to benefit investors in times of fear.

There have been periods of time throughout the last 100 years when gold outperforms stocks.

Morningstar’s Amy Arnott shows how gold won the battle outright for a few years in the 1970s.[6] Furthermore, their research since 1976 shows that typically, gold beats stocks during market downturns.


This also makes sense of a 15-year time period that includes the financial crisis and significant bear market in stocks where gold held a wide lead over that stretch, yet stocks ended eking out a victory.

Gold as Insurance and Diversifier

The problem is that outside of bear markets—which have been shorter lived, have lost much less than bull markets have gained, and have happened with less frequency since WW2[7]—the performance of gold is “uneven”. Arnott concludes,

Gold has consistently proved its mettle as a safe-haven asset and portfolio diversifier. In a portfolio context, though, its ability to improve risk-adjusted returns is a bit underwhelming. Overall, gold is best thought of as an insurance policy that’s best used in smaller doses.[8]

One buys insurance because one owns something else. You buy insurance because you already own a car or a house.

One doesn’t just spend all their money on insurance and buy nothing else.

Insurance is not much of a growth-oriented investment. It’s more of a form of risk management.

Arnott sees gold as a small insurance policy in a larger portfolio for diversification.

Is Gold Safe?

What I’m especially concerned about is when an investor believes—usually a belief rooted in fear about the future—that a big shift from stocks to gold is somehow “safe.”

Safety for, many people, implies security - not volatility.

The problem with a dramatic move out of stocks and into gold is that one is moving from one area of volatility to another area of volatility. In other words, from risk to risk. Arnott elaborates, “Gold in isolation is a risky asset—as witnessed by its 61.8% maximum drawdown over the test period…”[9]

That kind of gut-punching drawdown is not likely what those who bought gold considered a possibility. Usually those who fear stocks are scared precisely because of big drawdowns in equity markets.

Seems odd to run to a spot that has had horrifying declines of its own.

Why would one make such a move even if one knows that that kind of a decline is possible? Because, as one professor of finance might answer, “fear incites human action far more urgently than does the impressive weight of historical evidence.”[10]

We human beings are buyers and sellers of stories even if they prove to be fictional.

Is Gold a Money Substitute?

One of the greatest media advocates of gold is Peter Schiff. He was all over financial television in the financial crisis, and was on the Jordan Peterson podcast earlier this year.

To be fair, Schiff advocates for stocks, runs his own mutual fund, and does not call gold an investment.

In the interview, Schiff views gold as “honest money” and a substitute for cash. Not cash right now, mind you, as if you could walk into the grocery store and trade some gold nuggets for grapes. But cash that you might need in a few years due to things like inflation, currency devaluation, and geopolitical factors.[11]

My concern is that when people hear that kind of language juxtaposing gold with money and cash is that they might assume safety without volatility.

Furthermore, Schiff might be mistaken. He’s been wrong before.

For example, Business Insider reports that in 2009 on TechTicker Schiff argued that gold would be at $5,000 in “‘the next couple years’” and that it would trade on a one-to-one ratio next to the DOW.[12] A few years went by and in 2012 CNBC reported Schiff predicting a similar outcome: “gold to $5,000 per ounce within the next two years.”[13] Predictors of asset performance love to adjust their predictions—like a clever politician—when proved wrong.

And the prediction has been 100% wrong.

Gold has not reached $5,000 and the DOW has far outperformed gold since then. If you take the price of gold in US dollars to the DOW from the first time Schiff made that speculation till the time of this writing, the total return of the DOW is up not 10% more than gold, not 100% more than gold, but around 289% more than gold.


“Yet”, I could hear Schiff or any goldbug reply.

Fair enough.

It doesn’t change the fact that the forecast remains false, and investors who made drastic investment decisions expecting that kind of result would—at the very least—have been disappointed.

I also witness firsthand that data alone is not determinative when it comes to human decisions. We live and act by stories more than statistics. Investors like Schiff understand this.

Therefore, be a critical listener of financial media, and consider the narratives and emotional drives that are shaping your investment decisions.

I have no idea what the returns of gold or stocks will be in the future.

What we have learned is that over the last century, while gold sparkles in particular shorter-term time periods, stocks have outperformed over the long term—and it’s not even close.

Will investment returns change soon?


But you’ll have to get out another thing that sparkles—a crystal ball.

After all, I’m a financial advisor, not a sorcerer.



[1] “Historical Returns on Stocks, Bonds and Bills: 1928-2022”, January 2023. Accessed online: (July 18, 2023).

[2] The S&P 500 index was smaller pre-1957.

[3] “The Pros and Cons of Gold”, written by Christopher Dhanraj on June 27th, 2019. Accessed online: The pros and cons of gold| BlackRock Blog (July 18, 2023).

[4] Annual Berkshire Hathaway Shareholders Letter from 2011, p. 18. Accessed online: (July 18, 2023).

[5] Transcript of Warren Buffet’s appearance on CNBC’s Squawk Box on the morning of March 2, 2011. Accessed online: CNBC Buffett Transcript Part 2: The ‘Zebra’ That Got Away (July 18, 2023).

[6] “Gold Shines as a Haven in 2022” written by Amy Arnott on July 17, 2022. Accessed online: Gold Shines as a Haven in 2022 | Morningstar

[7] “10 Things You Should Know About Bear Markets” from Hartford Funds as of 12/31/2022. Accessed online: 10 Things You Should Know About Bear Markets (July 18, 2023).

[8] Arnott, see footnote 6.

[9] Arnott.

[10] Quoted by Nick Maggiulli in his blog titled “The Greatest Investment Quotes of All Time” on March 26, 2020. Accessed online: The Greatest Investment Quotes of All Time.

[11] Section “Look at Gold as Money” around 1hr 15min mark from Episode 353 of The Dr. Jordan B. Peterson Podcast titled “Economic Storms are Gathering” on May 1, 2023. Accessed online: For a transcription see Pangambam S’s article posted May 3, 2023. Accessed online:  Economic Storms are Gathering: Peter Schiff (Transcript) – The Singju Post.

[12] “Peter Schiff: U.S. Stock Rally and Dollar Doomed, Gold Going to $5,000” by Henry Blodget on Business Insider on September 25, 2009. Accessed online: (July 18, 2023).

[13] “Think Gold's Pricey Now? Wait Until It Hits $5000: Schiff” published October 25, 2012 on CNBC. Accessed online: (July 18, 2023).