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For thousands of years, gold has been prized as a symbol of wealth, power, and status. It has captivated societies across the globe, from ancient Egypt to modern-day America. Some admirers appreciate this precious metal’s beauty and durability, while others value its varied industrial applications.
With the rising cost of living, gold’s potential to serve as a hedge against inflation is particularly enticing. Many investors use gold to protect against market fluctuations, rising prices, and currency devolution. So, is gold a good investment? And is now the right time to integrate it into your portfolio?
In this article, financial advisor Nicole Sennett explores the rich history of gold investing and its shifting role in the U.S. economy. After that, she compares gold’s benefits and drawbacks to other popular investment options.
Gold’s Rich Economic History
People have invested in gold for over 5,000 years, with the first gold coin being minted around 600 BC. Since then, gold has remained a reliable asset for preserving wealth through countless economic cycles.
Revered for its ability to retain value, gold is widely considered a safe haven for investors. Its enduring appeal stems from the following attributes:
- Scarcity – Unlike paper currencies, gold is a finite resource. Its limited supply helps shield it from inflation, making it a trusted hedge against economic instability and geopolitical uncertainty.
- Durability – Gold has non-corrosive properties, making it an ideal value store. While other popular commodities like oil or grain may degrade over time, gold is impervious to rust, tarnish, and decay.
- Liquidity – Gold is valued worldwide and can be easily bought or sold in various forms, from bullion, coins, and bars to exchange-traded funds (ETFs). This accessibility ensures that investors can quickly enter or exit positions.
- Historic performance – Gold has consistently performed well during economic uncertainty, from high inflation to financial crises. Its value often rises as confidence in fiat currencies wanes. For instance, following the 2007 stock market collapse, gold’s value doubled by 2011. Similarly, gold reached an all-time high during the Covid-19 pandemic.
- Industrial demand – Gold’s critical role in industries like electronics, aerospace, and medicine adds to its demand and increases its price. As technology advances, the need for gold in these sectors will likely continue, helping maintain its value over time.
The United States’ Gold Standard
Gold’s reputation as a safe haven established the gold standard in 1900. This system tied the value of the U.S. dollar to a specific amount of gold, providing Americans with confidence that their currency had tangible backing and mitigating inflation and excessive money printing.
In 1971, President Richard Nixon abandoned the gold standard to address economic challenges, including a growing trade deficit and mounting pressure on U.S. gold reserves. Since then, the U.S. dollar’s value has become more vulnerable to various market forces, including:
- Interest rates
- Inflation
- Global economic conditions
- Government policies
- Financial market speculation
Now that the U.S. dollar is more volatile, many investors turn to gold to hedge against economic uncertainty.
The Pros and Cons of Investing in Gold
In recent years, gold has experienced a remarkable surge in value. It jumped by 25% in 2024, and as of February 2025, its price stands at over $2,950 per ounce. For context, an ounce of gold was priced at just $35 back in 1970. If this upward trajectory continues, many experts predict gold could surpass the $3,000 mark very soon.
With such an optimistic outlook, you may contemplate whether it’s time to add gold to your investment portfolio. But first, you should carefully weigh this precious metal’s benefits and potential drawbacks.
Pros of Investing in Gold
As of 2024, 85% of North American professional investors held some type of gold investment, up from 69% in 2018. Here are a few reasons why this commodity continues to shine as an investment:
- Diversification – Diversification involves spreading your investments across multiple assets to reduce risk and minimize the impact of any investment’s poor performance. In addition to stocks, bonds, and ETFs, gold can be a valuable part of a well-diversified portfolio. Since gold often moves independently of stock and bond markets, it acts as a stabilizing asset during market fluctuations and offers a buffer against potential losses.
- Tangibility – Unlike stocks or bonds, gold is a physical asset you can store. It comes in several forms, including coins, bullion, and bars. This tangibility can give you a greater sense of security, especially if your trust in digital or paper assets is diminishing.
- Hedge against inflation – Many investors consider gold an effective hedge against inflation, as it has historically preserved or even increased in value during inflationary periods. As the cost of living rises, holding onto some gold can help safeguard your purchasing power and protect your wealth over time.
- Safe haven during market volatility – Gold has historically held its value during geopolitical unrest or financial crises, particularly when stock markets experience sharp declines. Gold can offer some reassurance and portfolio protection if you’re worried about global recessions, market crashes, or political instability.
- Long-term performance – Gold has proven to be a solid investment over the long term, consistently performing well for decades. While its short-term returns can be volatile, its average annual price appreciation has been around 8%. This steady growth makes it a reliable option for long-term investors.
Cons of Investing in Gold
Gold has compelling benefits, but it’s not the best investment in every scenario. In fact, some experts are quite critical of this popular commodity, including legendary investor Warren Buffett. He believes the appeal of gold is mainly driven by fear and uncertainty, as opposed to fundamental economic or financial benefits.
In a 2009 CNBC interview, Buffett said, “I have no views as to where [gold] will be, but the one thing I can tell you is it won’t do anything between now and then except look at you… whereas Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money… It’s much better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage.”
With this perspective in mind, let’s examine some downsides of parking your money in this precious metal:
- Lack of yields – One of the most significant drawbacks of gold is that it doesn’t provide any consistent income. While it can appreciate in value, it won’t generate interest or cash flow, making it less attractive for investors seeking regular returns.
- Volatility – Gold is generally viewed as a stable long-term investment, but it can experience significant volatility in the short term. Its price often fluctuates in response to sudden shifts in demand driven by geopolitical events or economic data releases. These price swings can lead to sizable short-term losses, scaring away investors with lower risk tolerances.
- Storage costs and complexities – While some investors appreciate gold’s physicality, others find it cumbersome. To protect your investment, you must ensure it’s stored safely in a home safe or a bank vault. After factoring in storage and insurance fees, this can become expensive and potentially cut into your returns.
- Market manipulation – The gold market is susceptible to manipulation by powerful institutional players, including central banks and hedge funds. As of 2025, central banks control roughly one-fifth of all the gold ever mined. This allows them to influence gold prices through large buy or sell orders, which may concern investors seeking more predictable returns.
- Opportunity cost – As Warren Buffett pointed out, gold doesn’t offer the same growth potential as other investments. Since his 2009 interview, Coca-Cola and Wells Fargo stocks have surged 223% and 382%, respectively, while gold has only increased by 111%. If maximizing returns is your goal, you must weigh the opportunity cost of choosing gold over more growth-oriented investments.
How Gold Compares to Other Investments
Speaking of opportunity costs, comparing gold’s investment potential with other investment vehicles is essential before making your final decision. Here’s how gold stacks up to stocks, bonds, cryptocurrency, and other commodities:
- Stocks – Stocks offer much higher returns than gold over the long term. Many stocks also generate dividend payments, which can provide you with a steady income stream.
- Bonds – Bonds are a relatively safe investment that can generate regular interest payments. However, their returns are typically lower than stocks or gold, especially in low-interest-rate environments.
- Cryptocurrency – Similar to gold, many investors view cryptocurrencies as a hedge against inflation, with some calling Bitcoin “21st-century gold.” While Bitcoin has seen remarkable gains in recent years, cryptocurrency remains more volatile and speculative than gold.
- Other commodities – Commodities like oil or agricultural products can offer strong returns but are often subject to greater price volatility due to seasonal changes, geopolitical events, and supply-demand imbalances.
Based on these comparisons, gold certainly has its merits, but it’s unlikely to outperform well-chosen stocks over the long term. As a result, many experts recommend allocating just 5% of your portfolio to gold.
While these recommendations are helpful, you should always tailor your investment strategy to your unique needs, goals, and time horizon. That’s where an experienced financial advisor, like Nicole Sennett, can make all the difference.
Determine if Gold Belongs in Your Portfolio With Nicole Sennett
As a Chartered Retirement Planning Counselor (CRPC®) with 20 years of experience, Nicole Sennett specializes in crafting tailored investment strategies to help clients meet their financial goals. She can offer valuable insights into incorporating gold into your portfolio.
Before suggesting specific investment strategies, Nicole will take the time to understand your financial situation, short-term and long-term goals, and risk tolerance. From there, she can construct a balanced portfolio of stocks, bonds, commodities, and other investments.
Nicole takes a hands-on approach to wealth management, continuously monitoring market conditions to ensure your investments remain aligned with your objectives. She also works closely alongside Alden Investment Group’s strategic investment committee.
Ready to find out if gold is a good fit for your investment portfolio? Schedule your consultation with Nicole Sennett today!
** Investing in commodities involves risk, including loss of principal. Past performance does not guarantee or indicate future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance.
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