By Allen Giese, CLU®, ChFC®, ChSNC®
Ask the average person what tangible asset offers protection against inflation, and chances are they’ll say gold. With a legendary and mystical reputation that goes back as far as the ancient Egyptians, gold has been regarded as a symbol of enduring value. In more recent times, it’s often a refuge during periods of market volatility, embodying the classic “flight to safety.” And it’s long been recognized, and I’m not quite sure how or why, as the greatest hedge against inflation.
Let’s look at that. Is it really?
Following the market downturn in April and what was—if you believed what you read in the financial media—the seventh end of the financial world this quarter century, gold surged to an all-time high. This is a familiar pattern: In times of crisis, gold typically rallies.
But how does gold relate to inflation, the very threat it’s often touted as a hedge against? And how have equities—the volatile thing that gold is supposed to save investors from—performed compared with both inflation and gold?
A few noteworthy observations:
The price of gold in the chart is on June 20, 2025, the date this article was written, an all-time high.
The CPI was the most recent for the end of May 2025.
The S&P 500 is at the opening price on June 20, 2025.
Those most astute will recognize that the S&P 500 price ignores dividends being paid over all those years—just to be fair to gold. Gold doesn’t pay dividends. Or interest. Or anything. It just sits there, adding nothing to the world.
$800 (the price of an ounce of gold in 1980) invested in the S&P 500 these 45-plus years with dividends reinvested (and taxes paid from another source) would be worth approximately $131,000 today. That’s a far cry from $3,485.
So, is gold truly the inflation hedge it’s made out to be? Over the past 45 years, it has barely kept pace with inflation, rising roughly in line with the Consumer Price Index.
Meanwhile, a broadly diversified portfolio of equities—those supposedly “risky” assets—has dramatically outpaced both inflation and gold, even when we ignore dividends. And when dividends are included? The difference becomes staggering.
That doesn’t mean gold has no place in our lives. It’s beautiful in the right piece of jewelry. But if your goal is long-term growth and protection from inflation, history has delivered a clear verdict: Stocks have been the far better choice.