Why is it good to invest in gold? Gold protects your money when inflation, recessions, a falling dollar, or shaky banks threaten everything else you own.
Here, we’ll cover why gold holds value, how it does in inflation and recessions, what moves its price, and how it compares to stocks, real estate, ETFs, and Bitcoin.
Gold is worth owning because it holds its value during the exact crises that hurt stocks and the dollar the most.
Why is gold worth owning?
Gold has been used as money for over 5,000 years. It doesn’t rust, doesn’t decay, and can’t be created by policy decisions, which is why it has value.
All the gold we’ve mined so far across the world would fit in a cube about 22 meters per side.
Because miners can only add roughly 1.5% to that stock each year, gold holds up when currencies get diluted, one of several reasons to invest in gold.
Does gold protect against inflation?
Yes. Gold has outpaced inflation over time, and it does best when inflation is high.
The World Gold Council found gold returned about 8% a year when inflation was above 3%.
From July 1973 to September 1980, when inflation averaged 9.3% a year, gold rose from $115.20 to $680 an ounce, a return of about 28% a year. That track record is why gold ranks among the best investments during inflation.
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How does gold do in a recession?
Gold has gained value in six of the eight U.S. recessions since 1970. Schroders found gold returned 28% on average during recessions, beating the S&P 500 by 37 points.
Our last recession was in 2008. At that time, the S&P 500 fell about 50% while gold held steady, then rose 166% by 2011. That’s why gold prices tend to do well in economic stress, and why investors turn to gold during economic downturns.
Is gold a safe haven?
Yes. When markets panic, investors move into gold because it doesn’t depend on any company or government to hold its value.
Central banks are buying for the same reason, and a 2025 World Gold Council survey found 95% expect global gold reserves to keep rising. Gold is one of the few safe-haven assets, and physical gold in particular carries no counterparty risk.
Does gold protect against a weak dollar and bank risk?
Yes. Gold holds its value when the dollar loses purchasing power, or when people worry about banking or other financial systems.
When governments create money faster than the economy grows, that debasement eats the dollar’s purchasing power, and gold tends to rise. Countries are also moving away from the US dollar, and some analysts are calling for a currency reset.
What drives the price of gold?
Gold’s price comes down to demand from investors and central banks, the strength of the dollar, real interest rates, and how much new supply reaches the market.
Right now, heavy central-bank buying and a weaker dollar are the main reasons gold’s price is increasing. There are other factors that impact the price of gold, and our latest gold demand trends show what products are most popular and which states are buying the most.
Wall Street sees continued growth. J.P. Morgan projects $6,000 an ounce by 2027, and Goldman Sachs forecasts $5,400 by the end of 2026. See our gold price prediction and gold forecast for the full range of analysts’ thoughts.
We recently covered Nomi Prins’ predictions around gold hitting $9,000/ounce on our podcast:
How does gold compare to stocks and other assets?
Gold reacts to crises or good times differently from the assets most people already own, which is why it’s a great way to diversify your wealth.
Compared to stocks, gold has no earnings or dividends but holds up when stocks fall. Other assets like real estate are tangible and can keep pace with inflation, but they aren’t as easy to sell as gold. And unlike Bitcoin, gold has been a store of value for centuries.
If you want gold exposure, your main choices come down to bars and coins or a Gold ETF.
What are the downsides of owning gold?
Gold has some drawbacks to be aware of:
- No income: Gold pays no dividends or interest. Your return comes from the price going up.
- Short-term volatility: Gold can drop 10% or 20% in a year. If you sell during a dip, you’ll experience a loss.
- Storage and taxes: Physical gold costs money to store and insure, so you’ll need to account for the costs. Also note that any capital gains you make from selling gold get taxed at the 28% collectibles rate if you own it outside a retirement account.
How do you get started with gold investing?
Most financial planners recommend that you hold 5% to 10% of your portfolio in gold.
To learn more about why gold belongs in your portfolio, connect with the Swiss America team today.
Why invest in gold: FAQs
Does gold keep up with inflation every year?
No. Gold has outpaced inflation in only about 42% of calendar years since 1928. One reason it has value is from the crisis and high-inflation years. The World Gold Council found gold returned about 15% a year when inflation topped 3%, versus about 6% when it was lower.
Why are central banks buying so much gold?
To protect against a weakening dollar and persistent inflation. A 2025 World Gold Council survey found 95% of central banks expect global gold reserves to keep rising.
Can you hold gold in an IRA?
Yes. You can use a Gold IRA to hold physical coins and bars in a tax-advantaged account. You’ll work with a custodian who buys and sells on your behalf, follows IRS rules and handles storage at an approved depository.
What are the downsides of owning gold?
Gold doesn’t generate income, prices can go up or down 10% to 20% in a year, and it costs money to store and insure. If you hold gold outside a retirement account, the IRS taxes any long-term capital gains at the 28% collectibles rate.
The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
