Investing in gold: a perceived safety… but a strategy that needs nuance
Gold fascinates. A precious, timeless metal and a universal symbol of wealth, it has endured through the centuries as a safe haven. That’s why some investors say:
“I prefer to invest in gold — at least it doesn’t lose value.”
But behind that statement lies a myth that’s partly true and partly misleading. While gold can play a strategic role in a portfolio, it is neither infallible, nor always stable, nor risk-free. And most importantly, it does not replace a diversified investment strategy.
1. Gold produces nothing. It just sits there.
Unlike stocks (which pay dividends) or bonds (which pay interest), gold generates no income. You must rely solely on its price appreciation to hope for a return.
- When gold stagnates — sometimes for several years — the investor earns nothing.
- Taking inflation into account, the real value can even decrease despite a stable nominal price.
Between 1980 and 2005, the price of gold fell from $850 to… $440 USD per ounce.
(Source : Bloomberg, Historical Gold Prices)
2. Gold can be very volatile
The image of a “stable” asset is misleading. In reality, gold is one of the most volatile assets in the short term.
The fluctuations are significant, often driven by fear, interest rates, monetary policy, or speculation. It’s not a “quiet” asset — it’s an emotional one.
Gold is often presented as a hedge against inflation. But the data tells a more nuanced story.
According to a 2021 study by the CFA Institute, gold provided good protection against inflation in the 1970s — but much less so since then.
-
In the 1980s, despite high inflation, gold collapsed.
-
Since 2000, it has risen… but in parallel with the stock markets.
-
Between 2021 and 2023, inflation rose sharply, but gold remained relatively stable.
Conclusion : Gold is not a guaranteed hedge against inflation. It can work in some contexts — but not all.
Gold can have a place in a diversified portfolio:
-
It can act as a diversifier when stock markets are down.
-
It can reduce volatility when included in small amounts (often between 5% and 10% of a portfolio).
-
It can reassure some investors in times of geopolitical uncertainty.
But it should never be the only strategy. A 100% gold portfolio is extremely risky, illiquid, unproductive, and difficult to optimize for taxes (no easy RRSP/TFSA options, storage fees, etc.).
The belief that “gold never loses value” is more emotional than financial.
-
a diversified portfolio: stocks, bonds, cash, real estate, and metals (if desired);
-
a personalized plan based on your goals, time horizon, and risk tolerance;
-
long-term discipline, not impulsive decisions based on the economic climate.
“No single asset is always the best. It’s the consistent combination of assets, rebalanced regularly, that creates stability and performance.”
Gold is neither a bad investment nor an absolute guarantee.
It can play a tactical role, but it doesn’t replace the long-term growth of stocks, the stable income of bonds, or the flexibility of cash.
Putting “everything into gold” is like betting on a single color at the roulette table. The best protection isn’t a metal — it’s a strategy.
-
Bloomberg, Gold Historical Prices, 1980–2024
-
CFA Institute, Gold as an Inflation Hedge: Myth vs. Reality, 2021
-
Vanguard, Principles for Investing Success, 2020
