Is Investing In Gold Worth It? How Gold Prices Have Changed

Gold prices might be at record highs, but ask any veteran goldbug about investing in the precious metal and they’ll likely caution you that it will too often break your heart.

True, investing in gold tends to work in times of trouble. For example, gold prices vaulted past $2,000 an ounce in early March 2022 in response to the Russian invasion of Ukraine. Today, they’ve blasted past $3,500 on trade fears.

“Gold’s panic ascent shows that even safe-haven assets are not immune to the volatility unleashed in the confusion of the tariff age,” notes Susannah Streeter, head of money and markets at Hargreaves Lansdown. “Gold had been shining as a shelter amid the trade storm, but the bullion market has been blindsided by a specific threat of duties on gold bar imports into the U.S., sending U.S. futures prices soaring to record levels.”

Just understand that despite some lustrous returns in the 1970s (thanks to the end of the gold peg), and in the first decade of the 21st century, gold has mostly generated disappointing long-term performance compared to equities.

Between 1971, when convertibility was suspended, to its 1980 peak, gold rose to $840 an ounce from $35, or a compound annual growth rate of more than 40%, notes famed short seller Jim Chanos. Since 1980, however, gold’s annualized return comes to just 3%.

Even gold’s reputation as an inflation hedge isn’t all that great.

Historically, at least, gold returns have only kept up with inflation over the long haul; the metal hasn’t outperformed. Over the short and medium term, gold’s record as an inflation hedge is generally pretty poor.

To be sure, gold ETFs and gold miner stocks can be effective tools in the hands of traders and tactical investors. But that means knowing when to get in – and when to get out.

As for investing in gold for the long term? Suffice to say a buy-and-hold approach has too often ended in tears.

Just look at recent events. If any year should have been good for gold, it was 2022. U.S. stocks plunged into a bear market, and bonds got killed too. Investors worried incessantly over the odds of recession or possibility of stagflation. Inflation hit levels not seen in four decades.

And what did gold prices ultimately do? They ended the year almost exactly where they started.

Since investing in gold is obviously not easy, here are some critical nuggets you must know before betting on the precious metal.

Data, prices and returns are courtesy of Kitco, DQYDJ, the Perth Mint, the World Gold Council, YCharts, the U.S. Mint and Morningstar.