Historically, gold has long been sought after by investors as a hedge against inflation or macroeconomic downturns. Gold serves as a store of value, intended to behave independently of the broader equity and bond markets during periods of stress. Gold’s attractiveness to investors typically rises amid rising inflation expectations, weakening paper currencies, geopolitical tensions, and falling real yields. In recent times, we have seen that logic unwind. In Q2 2026, gold had its worst performance in 13 years, falling 14.1%. In that same time, the Iran war kicked off, there was a supply-side oil shock, and both inflation and unemployment remained above target.
Gold purchasers’ behavior materially shifted in 2024. Posting its highest return in 17 years, gold’s price appreciated by nearly 29%, its highest gain since 2007. A time when investors moved into a safe-haven asset as the Great Financial Crisis began unwinding. Gold appreciated 31% that year, its best performance since 1974, the year it became legal for U.S citizens to purchase gold bullion after a 41-year prohibition.
When you look at the full-year change in price for gold, it increased by 106% from January 1st 2025, to January 28th 2026, when it reached its all-time high of $5415 for one troy ounce (one troy ounce = 31.1 grams, roughly the weight of twelve pennies). Looking back 5 years to January 28th, 2021, gold had a cumulative appreciation of 193%, or 38.6% annual returns, taking into consideration a near three-year period of almost no price movement. Compare that to the S&P 500 total return of 133% over 5 years, or 26.6% annually; gold significantly outperformed during this period, with really only two years of strong performance.
Intuitively, you may have thought that this was attributed to the COVID-19 pandemic, supply chain disruptions, soaring bond yields, the Russia-Ukraine War, etc. But when you take a step back and look at the timeline coinciding with this shift, those who owned gold saw their holdings nearly lose value during the height of the pandemic and the three-year recovery (March 2020-May 2023), when inflation is factored in. Gold prices increased nearly 24.44%, while reported inflation, measured by the CPI-U (Consumer Price Index for Urban Consumers), rose by approximately 18.62%, reflecting real returns of 5.82%, drastically underperforming the S&P 500’s real return of around 58.5%.
Looking at 2024, the narrative that gold acts as a hedge, or inversely to equities, falls apart again. In calendar year 2024, gold was one of the best performers, with a return of 27.11%. Given the narrative that gold acts as a safe-haven investment during equity downturns, you might assume 2024 was one of the worst years for equities. It was the opposite. The S&P 500 Total Return benchmark had one of its best years, returning 25.02%. The Russell 1000 total return went up 24.51%. This shows that gold advanced in lockstep with one of the strongest equity markets in recent history. Rather than serving as a counterweight to risk assets, gold increasingly traded alongside them, benefiting from central bank purchases, fiscal concerns, momentum-driven flows, and investor demand for real assets.
Conclusion
Gold’s recent price action raises important questions about whether investors still view the metal primarily as a safe-haven asset. Historically, gold’s strongest periods of performance coincided with economic crises, inflationary shocks, financial instability, or declining confidence in traditional assets. Yet the past several years tell a different story. Gold struggled to meaningfully outperform inflation during much of the pandemic recovery, rallied alongside one of the strongest equity markets in recent history during 2024, and then experienced one of the most dramatic advances in its history between 2025 and early 2026. More recently, it suffered its worst quarterly decline in thirteen years despite geopolitical conflict, elevated inflation, and a supply-driven oil shock. While gold remains a widely held store of value, its recent behavior suggests that investors may increasingly be purchasing it for capital appreciation rather than protection. In other words, gold appears to be trading less like a traditional safe harbor and more like an asset whose value is increasingly influenced by market expectations, momentum, and investor sentiment.
