Gold has been hot, rising 65.2% last year and 168.2% over the past three years. Shockingly, gold has bested US stocks since the beginning of the year 2000. For the 26 years ended Dec. 31, 2025, gold has had an average annual return of 11.0% while the S&P 500 is up around 8.1% annually, including dividends.

These dates start near the top of the tech bubble and include the global financial crisis.

Reasons to buy gold

Gold and other precious metals have been on a tear. Gold enthusiasts explain the surge and why it will soon regain its luster as follows:

  • High inflation, or even hyperinflation, is unavoidable. The US government has never been this much in debt, and it is growing faster and faster as spending deficits grow higher and higher.
  • It’s simple economics: More money chasing the same amount of goods causes inflation.
  • There is the possibility of hyperinflation with the complete collapse of the dollar and other fiat currencies, along with the banking system (which almost collapsed during the global financial crisis).

As compelling as these arguments are, they may not be true. For example, Japan has been running huge deficits and fighting deflation. Even if these dire predictions don’t come true, gold has a long history as a hedge against inflation with very little real return. But there is no default risk, and it provides some diversification from equities as correlations are low—but not negative.

Which raises the question: With all of these reasons and a downturn in price since Jan. 29, am I recommending gold or other precious metals to clients? I am not, in part because of my own long-term experience.

My golden million-dollar mistake

I bought gold in mid-1980 after a 27% plunge over a few months, when it fell to $664 an ounce from $850. I bought it for all of the reasons I listed above. I thought I was buying it on sale because I benchmarked it against the price a few months earlier, rather than the earlier decade. I bought it after a roughly 1,700% surge.

My gold returned an estimated 4.2% annually or 1.3% annually after adjusting for inflation, according to DQYDJ.com. Because taxes are based on nominal dollars, if I had sold my gold and paid taxes, I would have less spending power today than in 1980 when I bought it.

About a year ago, I estimated that if I had heard of Jack Bogle and his S&P 500 index fund, I would have made an additional $1 million pretax. An important lesson I learned back then was that investing in capitalism (stocks) works better than speculation.

Does the recent surge in gold mean I have lost less? Yes and no. Clearly, gold’s 2025 return of 65.2% outpaced the 17.8% of the S&P 500 by 47.4 percentage points. Yet my million-dollar mistake grew by another $166,000 and is now approaching a $1.2 million mistake.

Does history repeat itself?

History certainly doesn’t repeat itself in the short run. Unfortunately, many investors and advisors often invest as if it does. Performance-chasing based upon a few months’ or a few years’ returns ends up resulting in lower returns. My 46 years of holding gold is more long-term. In fact, some data shows that gold has a very long history of only matching inflation over the past 3,000 years. With the recent surge, it may now have a bit more spending power than the previous couple of millennia. History does not always repeat itself, but it often rhymes. Though the world is and always has been quite risky, in most ways it is far less risky than centuries ago, when gold was arguably a more useful store of value.

To recap, gold has far outpaced stocks in the past few years, and even over the past 26 years, it has badly underperformed equities since I bought it in 1980 (46 years), and perhaps only slightly outpaced inflation since the days of the Roman Empire.

Today, we also have digital versions of gold known as cryptocurrencies, bitcoin being by far the largest. Stated reasons to buy crypto are the same as those reasons to buy gold listed in the beginning of this piece. In many ways, bitcoin is superior to gold. Its supply is hard-capped at 21 million coins, whereas there is no cap to gold mining. Bitcoin can be transported 24/7 around the globe in milliseconds, whereas gold must be physically transported. Bitcoin is easily divisible, as one can ship fractional bitcoins; one can’t do the same with a partial ounce of gold. While one can certainly sell any amount of a gold ETF, it would have to be converted to fiat currency.

I’m certainly not recommending bitcoin or other cryptocurrencies, but I am noting that gold has more competition than it has had over the past few millennia. Gold had a spectacular return in 2025, while bitcoin lost a bit and is continuing to lose in 2026. In other words, gold is hot while bitcoin is not. Both have value because we say they do (speculation), and the arguments to buy are very similar.

If you must buy gold, do it in moderation

I’m not recommending gold, but if you buy some, do it in moderation: no more than 2% to 3% of your portfolio. Understand that you are still buying it near the top of a real, inflation-adjusted price. That should carry a much higher weighting than a possible near-term price decline.

I learned a long time ago to invest in companies that generate cash flow from producing goods and services that fuel economic growth. In the long run, I believe that a broad low-cost index fund is highly probable to outpace speculation in gold or any precious metals.

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