Investing In Gold vs Stocks: Winner In 2026?

Is investing in gold vs stocks better? Ideally, you should have both. 

Since 1974, the S&P 500 has returned roughly 10% a year and gold about 6.5%. But gold gained 65% in 2025 while the S&P 500 returned about 18%, and gold hit an all-time high of $5,589 per ounce in January 2026. 

When you’re deciding between the two options, the answer depends on what each asset does for your portfolio and how much protection you want during downturns. 

How has gold performed compared to stocks historically?

Over the long run, stocks have delivered higher total returns. But gold has outperformed during some of the most consequential stretches for investors, including the past two years.

It became legal for individual investors to own physical gold again on December 31, 1974, during the Ford administration. Since then, the S&P 500 has turned every dollar invested into roughly $111, while gold has turned it into about $21. 

Here’s the historical comparison:

Asset	Start value (Dec 1974)	Value as of July 2026	Return multiple	Approx annualized growth (CAGR)
Gold	$195/oz	...	~21x	6.3% to 6.5% per year
S&P 500	67.07	~7,483	~111x	About 10% per year

How has gold compared to stocks recently? 

The historical numbers tell one story, but the past two years tell another.

In 2024, gold returned 28.7% while the S&P 500 returned 26.6%. In 2025, gold returned 65% while the S&P 500 returned about 18%. Central banks bought 863 tonnes of gold in 2025 and another 244 tonnes in Q1 2026, according to the World Gold Council. 

That sustained institutional demand helped push gold to its all-time high of $5,589 per ounce on January 28, 2026.

As of this writing, gold is down about 7% from that January peak. The S&P 500 is up about 7.6% for 2026.

Here’s the summary of gold vs stocks during the past two years:

Year	Gold return	S&P 500 return
2024	28.7%	26.6%
2025	65%	About 18%
2026 YTD	Down 7% from January peak	Up 7.6%

Does gold protect against inflation?

Gold has historically outperformed during high-inflation periods. The World Gold Council found that gold returned approximately 15% per year when inflation exceeded 3%, compared to roughly 6% when inflation was lower. 

A Charles Schwab analysis comparing gold, stocks, and inflation shows that neither asset wins in every period. Gold tends to outperform during inflationary shocks, while stocks have done better over long stretches of moderate inflation.

Should you invest in gold, stocks, or both?

Both. They do different things. Stocks are for long-term growth. Gold is for protecting your purchasing power when markets fall, inflation spikes, or geopolitical risk rises.

Many financial planners recommend holding 5% to 10% of your portfolio in gold. That allocation provides diversification without concentrating too much in a single asset class. Some planners recommend up to 20% during periods of elevated uncertainty.

The right split depends on your time horizon and risk tolerance. A 60-year-old approaching retirement has different needs than a 35-year-old with decades of compounding ahead. The retiree benefits more from gold’s downside protection. The younger investor benefits more from stocks’ higher long-term growth rate.

What are the advantages and drawbacks of gold?

Gold’s biggest advantage is that it holds value when other assets drop. It has no counterparty risk because it doesn’t depend on any company’s performance.

Advantages

• Inflation hedge: Gold has gained value in six of eight U.S. recessions since 1970, returning 28% on average, per Schroders research.
• Low correlation: Gold moves independently of stocks and bonds. When the S&P 500 fell roughly 50% during the 2008 financial crisis, gold held steady, then gained 166% by 2011.
• No counterparty risk: Physical gold doesn’t rely on a company, bank, or government to retain its value.

Drawbacks

• No income: Gold doesn’t pay dividends or generate cash flow. It’s a defensive asset, not a cash generator.
• Storage costs: Physical gold requires secure storage and insurance, which add ongoing costs.
• Higher tax rate: The IRS taxes gold at the 28% collectibles rate for long-term capital gains, compared to 15% or 20% for stocks. A Gold IRA can defer that tax.

What are the advantages and drawbacks of stocks?

Stocks offer higher long-term returns than any other major asset class, averaging about 10% annually since 1974.

Advantages

• Higher growth: Over long periods, stocks have consistently outperformed gold, bonds, and real estate in total return.
• Dividend income: Many stocks pay quarterly dividends, providing a steady income stream.
• Liquidity: Stocks trade on public exchanges and can be bought or sold in seconds during market hours.

Drawbacks

• Volatility: The S&P 500 dropped 34% in March 2020 and roughly 50% during the 2008 crisis. Short-term swings can be severe.
• Company-specific risk: Individual stocks can lose all their value if a company fails. Diversification through index funds reduces this risk but doesn’t eliminate market-wide declines.
• Counterparty exposure: Stock value depends on the performance and management of the underlying company.

Summary of the pros and cons of gold vs stocks:

Factor	Gold	Stocks
Long-term returns	About 6.5% annually since 1972	About 10% annually since 1974
Income	No dividends or cash flow	Some pay quarterly dividends
Recession performance	Gained value in 6 out of 8 recessions, returning 28% on average (Schroders)	S&P 500 fell 50% in 2008 and 34% in March 2020
Counterparty risk	None for physical gold	Depends on the company’s performance
Correlation to stocks	Low; often moves independently	Correlated to the broader market
Tax treatment	28% collectibles rate	15% or 20% long-term capital gains
Storage costs	Requires secure storage and insurance	None
Liquidty	Sold through a dealer	Easy to buy and sell in seconds on exchanges

How do you invest in gold?

There are three main ways to add gold to your portfolio, and each carries a different level of ownership and risk.

• Physical gold bullion: Gold bars and coins that you buy from a precious metals dealer and hold directly. You own the metal. No counterparty risk.
• Gold ETFs: Exchange-traded funds that pool investor money to buy physical gold and issue shares representing ownership. More liquid than physical gold, but you carry counterparty risk from the fund issuer.
• Gold mining stocks: Shares in mining companies, or mutual funds that track a mix of gold-related assets. Returns depend on company performance, not just the gold price.

What are the steps to start investing in gold?

1. Decide what type of gold to buy. Physical bullion gives you direct ownership. ETFs give you market exposure without storing metal. Mining stocks add company-level risk and reward.
2. Choose a dealer or brokerage. For physical gold, work with an established precious metals dealer with a track record, a two-way buy-back policy, and clear disclosure of costs. For ETFs or mining stocks, use a brokerage account.
3. Consider a Gold IRA. If you want to hold physical gold in a tax-advantaged retirement account, a Gold IRA lets you buy coins and bars with tax-deferred or tax-free growth.
4. Dollar-cost average. Buying gold in increments over 3 to 6 months reduces the risk of purchasing at a short-term peak.

We cover these steps in one of our podcasts below:

How do you invest in stocks?

Stocks give you ownership in companies that trade on public exchanges. Returns depend on how those companies perform.

• Individual stocks: Direct ownership in a single company. Higher potential return, but also higher risk if that company underperforms.
• Index funds and ETFs: These pool money from many investors to buy a broad mix of stocks. An S&P 500 index fund, for example, gives you exposure to 500 large U.S. companies in a single purchase.

Final thoughts on gold  vs stocks

Stocks grow your portfolio over time. Gold protects you when markets fall. The two do different jobs, and the past two years show why holding both matters. Gold returned 65% in 2025 while stocks returned about 18%. Over the long run, stocks still lead at roughly 10% a year. A 5% to 10% allocation in physical gold gives you downside protection without giving up growth.

To learn more about adding gold to your portfolio, connect with the Swiss America team today!

Investing in gold vs stocks: FAQs

Is physical gold better than a gold ETF?

Physical gold has no counterparty risk. You own the metal outright, and its value doesn’t depend on a fund issuer, bank, or exchange.

• ETF tradeoff: Gold ETFs are more liquid and easier to trade, but you hold shares in a fund, not metal. If the issuer fails, your claim is on the fund, not on gold.
• Gold IRA option: A Gold IRA lets you hold physical coins and bars inside a tax-advantaged retirement account with tax-deferred or tax-free growth.
• Storage consideration: Physical gold requires secure storage and insurance, which add ongoing costs. A Gold IRA custodian handles storage for you at an approved depository.

Can you lose money investing in gold?

Yes. Gold dropped roughly 60% between 1980 and 2000, and short-term drops of 10% to 20% in a single year aren’t unusual.

• Timing risk: Buying at a peak and selling during a dip locks in a loss. Gold hit $5,589 in January 2026 and was down about 7% by mid-year.
• Dollar-cost averaging: Buying in increments over 3 to 6 months reduces the risk of purchasing at a short-term high.
• Holding period: Gold’s strongest returns have come over multi-year stretches, not months. Investors who held through the 1980s to 2000s decline saw gold rise from about $280 to over $4,000 in the following 25 years.

Has gold ever beaten the stock market?

Yes, and the most recent example is 2024 to 2025. Gold returned 28.7% in 2024 (vs. the S&P 500’s 26.6%) and 65% in 2025 (vs. the S&P 500’s 18%).

• 25-year stretch: From 2000 to 2024, gold returned about 9.8% annualized, compared to about 9.2% for the S&P 500, making it one of the rare periods where gold edged out stocks.
• Crisis outperformance: Gold’s strongest periods come when stocks are weakest, which is why many investors hold both.
• All-time high: Gold hit $5,589 per ounce on January 28, 2026, driven by central bank buying, inflation concerns, and geopolitical risk.

Why is gold so expensive right now?

Central bank buying is the biggest driver. Central banks purchased 863 tonnes of gold in 2025 and another 244 tonnes in Q1 2026, according to the World Gold Council.

• Institutional demand: A 2025 World Gold Council survey found that 95% of central banks expect global gold reserves to keep rising. That sustained buying gives the price a floor.
• Inflation and debt: Persistent inflation concerns and expanding sovereign debt have pushed investors toward tangible assets that hold value outside the financial system.
• Geopolitical risk: Escalating global tensions contributed to gold’s all-time high of $5,589 per ounce on January 28, 2026.

How does gold perform when the dollar drops?

Gold tends to rise when the dollar weakens. Because gold is priced in U.S. dollars globally, a declining dollar makes gold cheaper for foreign buyers, which increases demand.

• 2020 to 2026 example: The U.S. Dollar Index fell from over 114 in late 2022 to under 100 by mid-2025. Gold more than doubled over the same period.
• Debt connection: When government debt expands and deficits widen, confidence in the dollar tends to fall. Gold benefits as an alternative store of value outside the currency system.
• Central bank signal: Many central banks increasing their gold reserves are doing so specifically to reduce their dependence on the U.S. dollar, per the World Gold Council’s 2025 survey.

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.