The case for gold: Protect and build your wealth

Why buy gold?

Gold has been a proven investment for thousands of years. Why? Because gold holds its value for generations and is universally recognized as a store of wealth.

Today, gold offers investors four key benefits:

  • Long-term returns: gold delivers positive returns in good times and bad, gaining ground particularly during periods of high inflation.
  • Diversification: gold behaves differently from other assets, holding its own even when other assets such as bonds and the stock market are under pressure.
  • Portfolio protection: gold makes portfolios less risky and helps generate higher returns.
  • Liquidity: the gold market is large and accessible so gold can be bought and sold with ease, even when conditions in other markets are tough.

Delivering long-term returns and beating inflation

Gold generates robust returns across economic cycles. Looking back over the past 50 years, gold prices increased by an average of nearly 11% per year[1], comparable to the returns from US equities and considerably better than US bonds. Gold consistently outpaces inflation, too[2]. In periods of high inflation – when consumer prices are increasing by 5% or more, – gold prices on average have gained over 20%[3] (Chart 1).

Chart 1: Gold historically rallies in periods of high inflation

Source: Bloomberg, Bureau of Labour Statistics, ICE Benchmark Administration, World Gold Council

Based on y-o-y changes of the LBMA Gold Price, Bloomberg Commodity Index and US CPI between 1971 and 2022. Number of observations for each tranche: Low = 12, Moderate = 22, High = 12. The buckets were determined based on a 2% Fed target rating, a recent CPI number above 5% and a proportional amount of observations in each tranche. The results are consistent when adjusting tranche levels moderately.

Providing real diversification

Investors want protection in tough times—and historically, this is when gold shines, moving higher when equities and other riskier assets are under pressure. Unusually though, gold can also move higher when these assets are in positive territory. This ability to perform in good times and bad is based on gold’s varied demand and makes it a uniquely efficient asset for an investment portfolio.

Protecting your portfolio

Gold can make a material difference to investment portfolios’ returns because portfolios that include gold are less likely to experience extreme highs and lows.

Outperforming the US dollar

Gold has significantly outperformed the US dollar and other major currencies for decades. In the 21st century alone, major currencies have depreciated by more than 90% against gold and, over the past 100 years, they have lost 99% of their value compared to gold. Simply put, gold helps investors to preserve their purchasing power down the generations.

Easily traded

The gold market is large, global and highly liquid so investors or their beneficiaries can buy or sell gold easily, even when financial markets are under pressure.

The complete guide to buying gold safely

For more detailed information on gold products and finding the right gold seller for you, download our full investor guide here.

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Key takeaways

  • Gold is an asset unlike any other. Scarce and highly prized, it has delivered average annual returns of 11% over the past 50 years.
  • Gold comes into its own during difficult times, delivering particularly strong gains when inflation is high.
  • Yet gold performs well during good times too, when demand for gold in jewelry and technology increases.
  • The gold market is highly liquid. Investors can buy and sell gold whenever they choose, including in periods of extreme stress in the financial markets.
  • Gold helps to make investment portfolios less risky, even as it enhances investment returns.
  • Adding between 6% and 10% asset allocation to gold in the average US portfolio has made a tangible improvement to performance and boosted returns on a sustainable, long-term basis.

About the World Gold Council

We’re the global experts on gold.

Leveraging our broad knowledge and experience, we work to improve understanding of the gold market and underscore gold’s value to individuals, investors, and the world at large.

Collaboration is the cornerstone of our approach. We’re an association whose members are the world’s most forward-thinking gold mining companies. Combining the insights of our members and other industry partners, we seek to unlock gold’s evolving role as a catalyst for advancements that meet societal needs.

We develop standards, expand access to gold, and tackle barriers to adoption to stimulate demand and support a vibrant and sustainable future for the gold market. From our offices in Beijing, London, Mumbai, New York, Shanghai, and Singapore, we deliver positive impact worldwide.

For more information

Please contact:

World Gold Council WGC USA, Inc. 685 Third Avenue, 27th Floor New York, NY 10017, United States of America

WGC (UK) Limited 15 Fetter Lane, London, EC4A 1BW United Kingdom

  1. Average annualized returns in US dollars from January 1971 to December 2021.
  2. Based on average annual CPI changes for the US (3.94%) and world (10.4%) as measured by the IMF from December 1971 – December 2021.
  3. The 15 instances US CPI was higher than 4%, the average gold return was 21%, while in the 10 instances that US CPI was higher than 5%, gold increased 27% on average.

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All references to LBMA Gold Price are used with the permission of ICE Benchmark Administration Limited and have been provided for informational purposes only. ICE Benchmark Administration Limited accepts no liability or responsibility for the accuracy of the prices or the underlying product to which the prices may be referenced. Other content is the intellectual property of the respective third party and all rights are reserved to them.

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This information is for educational purposes only and by receiving this information, you agree with its intended purpose. Nothing contained herein is intended to constitute a recommendation, investment advice, or offer for the purchase or sale of gold, any gold-related products or services or any other products, services, securities or financial instruments (collectively, “Services”). This information does not take into account any investment objectives, financial situation or particular needs of any particular person.

Diversification does not guarantee any investment returns and does not eliminate the risk of loss. Past performance is not necessarily indicative of future results. The resulting performance of any investment outcomes that can be generated through allocation to gold are hypothetical in nature, may not reflect actual investment results and are not guarantees of future results. WGC does not guarantee or warranty any calculations and models used in any hypothetical portfolios or any outcomes resulting from any such use. Investors should discuss their individual circumstances with their appropriate investment professionals before making any decision regarding any Services or investments.

This information may contain forward-looking statements, such as statements which use the words “believes”, “expects”, “may”, or “suggests”, or similar terminology, which are based on current expectations and are subject to change. Forward-looking statements involve a number of risks and uncertainties. There can be no assurance that any forward-looking statements will be achieved. WGC assumes no responsibility for updating any forward-looking statements.

Information regarding QaurumSM and the Gold Valuation Framework Note that the resulting performance of various investment outcomes that can generated through use of Qaurum, the Gold Valuation Framework and other information are hypothetical in nature, may not reflect actual investment results and are not guarantees of future results. Neither WGC nor Oxford Economics provides any warranty or guarantee regarding the functionality of the tool, including without limitation any projections, estimates or calculations.