What's The (Gold) Rush?
Gold has delivered eye-catching gains in recent years, surging past $4,000 per ounce this year and headlining financial media with talk of safe havens, inflation fears, and geopolitical uncertainty. This performance has increased investor enthusiasm, but history and research suggest caution.
By Investment Analyst Elizabeth Molique
Gold has delivered eye-catching gains in recent years, surging past $4,000 per ounce this year and headlining financial media with talk of safe havens, inflation fears, and geopolitical uncertainty.[1] This performance has increased investor enthusiasm, but history and research suggest caution.
At SJS, we believe investments should be grounded in fundamentals. Assets ought to generate earnings or possess inherent value beyond the hope of resale at a higher price. When the rationale for owning something is simply that someone else might pay more for it later, we’ve crossed into speculation - where value is propelled by hope or hype.
Gold is a unique asset. It doesn’t produce income like stocks or bonds. It doesn’t compound, doesn’t pay dividends, and for most investors, it has limited practical use. Its value is largely determined by sentiment by what someone else is willing to pay for it, which makes it inherently different from productive assets.
The supply of gold remains relatively stable; demand is less so. Gold supply is driven by mining and recycling, with lab-grown gold contributing in rare cases. Advances in lab-grown gold may increase supply in the future, with the impact on prices difficult to predict. Investor psychology, macroeconomic fears, and geopolitical tensions can all drive demand, and therefore price, in unpredictable ways. This volatility creates a mismatch with the narrative often attached to gold: that it is a reliable hedge against inflation. But historically, gold has not consistently behaved as an inflation offset. Its price movements are often more volatile than inflation itself, and its correlation with inflation is far from perfect.
Comparatively, the long-term value of stocks is driven by the profits and cash flows of the underlying businesses. The long-term value of fixed income is driven by contractual payments with businesses and other entities in exchange for providing financing. We think that there are more robust economic theories underlying why stocks and fixed income will increase over time than for gold.
Since 1969, gold has lagged U.S. stock returns. Its annualized return has been lower than the S&P 500 Index, while its standard deviation, a measure of risk, has been notably higher from April 1969 to October 2025.[1]
Source: Morningstar. Data spans from 4/30/1969 – 10/31/2025 for average annual return, standard deviation, and correlations. Inflation is represented by the US BLS CPI All Urban SA. Gold is represented by the LBMA Gold Price PM USD, the official benchmark price for gold set in US dollars each afternoon in London, used globally to standardize gold pricing. S&P 500 is represented by the S&P 500 TR Index. See Important Disclosure Information.
Gold is not new - it has been used as a currency and investment asset for thousands of years. Based on a 2025 study by Claude Erb and Campbell Harvey, gold has held its after-inflation value for the last 2,000-plus years; at the same time, its after-inflation purchasing power has not changed much, which implies a real return around 0%.[2]
This 2,000-plus year performance is in contrast to the past few decades, when gold has performed well. Even the recent performance has been uneven - a gold investor would have had to endure nearly 25 years of cumulative losses from the early 1980s to the mid 2000s. While no one knows what will happen, historical precedent does not lead us to be optimistic about the future prospects of gold.
Source: Morningstar. Gold is represented by the LBMA Gold Price PM USD, the official benchmark price for gold set in US dollars each afternoon in London, used globally to standardize gold pricing. The SPDR® Gold Shares ETF (GLD) was the first gold ETF launched in the U.S. on November 18, 2004. See Important Disclosure Information.
While gold has hedged against inflation and has preserved purchasing power for over 2,000 years, few of our clients have such a long investment horizon. Over shorter periods, gold has exhibited volatility comparable to stocks. Even though direct ownership of gold may not be our preferred strategy, there are several indirect approaches that can help create exposure to gold, serving as useful portfolio diversifiers during periods of speculation.
One option is to invest in companies connected to gold supply and demand, such as mining firms. In a well-diversified portfolio, ownership of these companies is typically already included as part of broader market exposure. Another approach is to access gold exposure through alternative investment strategies - such as buying & selling gold futures within a diversified investment strategy as well as providing price certainty to investors through insurance-like instruments - that have historically been profitable. These methods can be particularly beneficial in times of heightened inflation or when inflation expectations are rising.
When considering investing in gold, it is important to remember historical lessons. During the California Gold Rush in the mid-1800s, the reported wealthiest individual in California was not a gold miner, but a businessman who profited from selling mining supplies and publishing news about the rush.[3][4] While gold remains a time-tested store of value, we believe that successful investing requires a balanced approach that considers both historical insights and practical portfolio strategies that are not solely focused on golden opportunities to strike it big.
Important Disclosure Information & Sources:
[1] Source: LBMA. Gold is represented by the LBMA Gold Price PM USD, the official benchmark price for gold set in US dollars each afternoon in London, used globally to standardize gold pricing.
The S&P 500 TR Index tracks the price changes of 500 leading publicly traded US companies.
Inflation is represented by the US BLS CPI All Urban SA, which measures the average change over time in the prices paid by urban consumers for a market basket of goods and services in the US, seasonally adjusted.
[2] “Understanding Gold”. Claude B. Erb and Campbell R. Harvey, 07-Oct-2025, papers.ssrn.com.
[3] “California Gold Rush”. History.com Editors, 28-May-2025, history.com.
[4] “Samuel Brannan: Gold Rush Entrepreneur”. PBS, pbs.org.
Past performance does not guarantee future results. Diversification neither assures a profit nor guarantees against a loss in a declining market. There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with management of an actual portfolio. Index performance is measured in US dollars. The index performance figures assume the reinvestment of all income, including dividends and capital gains.
MarketPlus® Investing models consist of registered investment companies. Investment values will fluctuate, and shares, when redeemed, may be worth more or less than original cost.
Statements contained in this document that are not statements of historical fact are intended to be and are forward looking statements. Forward looking statements include expressed expectations of future events and the assumptions on which the expressed expectations are based. All forward looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected.
Reap What You Sow
Investment droughts will arise. Instead of trying to predict when and where ‘rain’ may come, we recommend that you preemptively plant your assets in rich soil.
By SJS Senior Client Portfolio Manager Tom Kelly, CFA
Sometimes, things don’t happen as you might expect. The first quarter of 2019 will be remembered for bringing us the longest government shutdown in U.S. history, continued trade wars with China, lowered consumer confidence – and U.S. investment markets that were up more than 13 percent, as shown in the graph below.[1]
The year started out with a bang rivaling the fireworks displays of New Year’s Eve, as U.S. stocks posted their best January in 30 years – all of this coming on the tail of the bear market at the end of 2018.[2]
While there may have been temptation to act to protect against further losses, this more often than not leads to loss and regret. Prudent investors who stayed the course would have been rewarded for their discipline.
The first three months of 2019 have been a budding reminder that the markets efficiently price in information before we even know or hear about it. Market timing is a fool’s errand.
In fact, Nobel laureate William Sharpe – who created the Sharpe Ratio return/risk metric, which is used to help investors understand the return of an investment compared to its risk – determined that someone who tries to time the markets must be right 74 percent of the time in order to outperform a buy-and-hold approach on a risk-adjusted basis.[3],[4] The cost of being wrong gets exacerbated during periods of volatility, just as the desire to tweak and tinker increases.
Instead of market timing, MarketPlus Investing® is based in part on the idea that diversification may be a smarter way to increase expected return for a given level of risk. Adding diversification should increase the Sharpe Ratio, which helps demonstrate that excess returns above the “risk-free rate” (the return of a U.S. Treasury bill) are the result of good investment decisions instead of increased risk taking.[3]
Investment droughts will arise, so instead of trying to predict when and where the ‘rain’ might come, we recommend that you preemptively plant your assets in rich soil – a MarketPlus portfolio designed with comprehensive market coverage, calculated risk exposure, and cost-efficient implementation.
As spring approaches, the new green shoots popping up everywhere serve as a great reminder of the growth that follows the strain of a harsh winter. Just as the work is done far before you see the fruits of your labor, our science-based process of structuring and designing portfolios to help you achieve your financial goals has weathered the test of time, through seasons both good and bad.
So, go out and enjoy working in your garden, cultivating relationships, or rooting yourself in a new hobby this spring. You can be sure we’ll be following the same nurturing approach with your portfolio by maintaining the discipline of our MarketPlus Investing philosophy.
Sources:
[1] S&P 500, 2019 YTD Performance as of 3/31/2019. Morningstar.
[2] Amrith Ramkumar, “Stocks Post Best January in 30 Years.” Wall Street Journal, 2/1/2019.
[3] Marshall Hargrave, “Sharpe Ratio Definition.” Investopedia.com, 3/9/2019.
[4] William Sharpe, “Likely Gains from Market Timing.” Financial Analysts Journal, vol. 31/no. 2, 1975.
Important Disclosure Information:
Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Diversification does not assure a profit or protect against loss.
Suggested Reading
10 Commandments … of Money
It seems like a good time to share one of our most requested SJS features – the 10 Commandments…of Money. We think good advice certainly bears repeating!
By SJS Founder & CEO Scott Savage
Now seems like a good time to share one of our most requested SJS features – the 10 Commandments … of Money.
We think good advice certainly bears repeating!
Thou shall diversify investments, because markets tend to be efficient.
Thou shall not live beyond thy means.
Thou shall not attempt to time the market.
Thou shall not give unearned money to thy children, robbing them of a vital learning opportunity.
Thou shall not abandon investment discipline during a Bear Market.
Thou shall not abandon investment discipline during a Bull Market.
Thou shall not covet thy neighbor’s hedge funds.
Thou shall not hire a money manager based on recent track records.
Thou shall not overpay for the delivery of investment advice.
Thou shall not pay undue taxes in an investment portfolio.
Suggested Reading
It Pays To Look Back
There is something we can do to escape the busy trap. What’s the trick? Spend a little time every day looking back and celebrating your successes.
Why It’s Important to Stop and Enjoy Success
By SJS Founder & CEO Scott Savage
Ask just about anyone how they’re doing and you often hear them say, “Fine. Good. Great.” And usually one other word: “Busy.” Tim Kreider, who wrote a piece called “The Busy Trap” for he New York Times in 2012, highlighted our national obsession with being busy.
Most of us feel this way and admittedly, for all of us at SJS, it’s hard to not be busy when you are taking care of people’s wealth. To us, that’s a big responsibility that demands a lot of attention. Short of throwing responsibility to the wind, there is something we, and everyone else, can do to escape the busy trap even for a short time. And it costs nothing. What’s the trick? Spend a little time every day looking back and celebrating your successes.
We know from our own experiences working with successful people that not only are we, as Americans, too busy to take time off, we are often too busy to relish our victories. Typically, we over-achieving types quickly move on to the next challenge. One afternoon recently, we decided to change that and took a 17-year look back at the performance of an institutional client’s portfolio. Our client is happy; the organization has been with SJS since the very beginning. But aside from the great relationship we enjoy with this client, and the peace of mind they say we have provided, what else have we accomplished for them? In our world – we’re numbers people – we turn to investment results.
Here are the wins we are happiest about:
We affirmed our Four Core Fundamentals of MarketPlus® Investing - That’s a win in terms of discipline:
Markets are Efficient and Priced Fairly
Speculating is Futile
Global Stocks and Bonds Have Rewarded Investors Over the Long Term
Portfolio Design Matters Most
We recognized that our belief in the fundamentals of our investment strategy has remained strong since our inception. That’s a win for consistency.
We have inspired the institution to maintain discipline over the last 17 years. To their credit, it hasn’t always been easy, with major economic events during that time including the tech bubble of the early 2000s, and the Great Recession of 2008 and 2009. That’s a win for communication and relationships.
Despite the volatility of the last 17 years, this client portfolio has outperformed its benchmark by roughly 1% annualized after fees. This adds additional purchasing power to an investment portfolio. That’s a win for furthering their cause.
As we were wrapping up our “slow down and celebrate” meeting, we reaffirmed to ourselves that MarketPlus Investing is purposeful, disciplined, intentional, and repeatable. The process helped us realize that we can slow down to relish some success for our clients and for ourselves. It also got us thinking that if we can do it in our business, anyone can. What successes have you had? Celebrate them!
Important Disclosure Information & Sources
Past performance is no guarantee of future results.