Gold vs. the S&P 500

Gold Is Not Just for Chaos, No Matter What Wall Street Says

Today, I had a conversation with an investment banker I know. He—let’s call him Steve—actually read my piece yesterday on hyperinflation in Germany’s Weimar Republic. (If you missed it: gold went from around 170 marks to 87 trillion marks in just four years.)

Steve brought up a point I’ve heard many times before: sure, gold is great in times of crisis—but in “normal” times, you’re better off in the stock market.

I disagreed. In fact, I disagreed so much I decided to write this quick follow-up, since I figured others might have gotten the wrong impression too.

Let’s start with a simple fact.

If you held gold over the past year, you’d have done a lot better than if you held the S&P 500. Gold returned 40%. The S&P 500? Just 8%. That’s a 5-to-1 outperformance. Take a look at the chart below.

Now, maybe you're thinking: come on, that’s cherry-picking. Stocks have had a rough few months lately— thanks in large part to Trump’s tariffs and general boat-rocking. Fair enough. That’s exactly what Steve said too, by the way.

So I said, alright Steve, let’s zoom out.

Let’s roll back the clock 25 years. That should be enough time to smooth out the noise. The chart below tells the story.

As you can see, gold is up 966% since 2000, while the S&P 500 has returned a “mere” 296%. That’s gold outperforming stocks by more than 3x.

To put that in dollar terms: if you’d put $5,000 into gold back in 2000, you’d have around $53,300 today. That same $5,000 in the S&P 500? About $19,800.

Big difference.

Again, we’re talking plain old gold here—physical metal, not mining stocks (many of which, by the way, delivered much higher returns over the same period). But nearly 1,000% without any of the added risk that comes with stock picking? That’s pretty impressive.

At this point, even Steve was starting to nod—reluctantly. But if I were him, I might have tried one more angle: “Okay, but what if I didn’t hold gold for the whole 25 years? What if I bought and sold year to year?”

Fair question.

Here’s a table I compiled that breaks down year-by-year returns for gold and the S&P 500 over the past 25 years.

Two things jump out.

First: gold had only 4 down years during that time. The S&P 500 had 7.

• Of those 4 red years for gold, only one—2013—was significant (down 31%).

• The others were minor (under 3%).

• Meanwhile, most of the S&P’s down years were deeper, with three double-digit losses.

In short, gold gave you fewer chances to get burned, especially if you were jumping in and out.

Second: gold delivered better average annual returns.

• Gold averaged 10.2% per year.

• The S&P 500 averaged 8.8%.

That difference may seem small, but as you saw earlier, compounding adds up—and over 25 years, it turns into a massive gap.

Now, am I saying gold will always beat the stock market? Of course not. There’ve been plenty of periods where stocks came out ahead. But this idea that gold only shines in “crazy” times and is a poor investment in “normal” times just doesn’t hold up.

Have a great weekend,

Lau Vegys

P.S. Since we’re talking about gold—did you know 2,000 metric tons of physical gold have quietly flowed into the U.S. since December? That’s 64 million ounces… nearly a quarter of America’s official reserves. Matt Smith believes this is no accident. He thinks it ties directly into Trump’s plan to overhaul the financial system in a way we’ve never seen before. Click here for details.