Nugget. Necklace. Ring. Bar. Coin. Flake.
What didn’t make the list? Investment.
In my daily conversations with investors, gold is coming up more often. This is commonplace in our world: whichever asset class is in vogue seems to be discussed with an undercurrent of “perhaps we should allocate more”. Whichever asset class is out of favor is written off as a lackluster investment unlikely to see the light of day anytime soon. It’s basically the opposite of shopping on Amazon Prime Day. Price Up = Good Investment, Price Down = Bad Investment.
With many of the biggest businesses in the stock market at all-time highs, investors are once again asking: shall we take some risk off the table? Can the CapEx on the AI buildout be justified anytime soon? Are we in a bubble of sorts?
And if you determine the answer to that initial question above is yes, then the next question becomes, “where should I allocate my capital to?” Hm, what’s been a good investment? Bingo! Gold.
In practice:
I would like to drastically reduce my exposure to US companies that are spending substantial amounts on AI initiatives…spending they believe will deliver value to their customers and, in turn, their shareholders.
In place of these companies, I intend to purchase metal (particularly gold). I’m hoping that the next person will pay as much or more for this metal which, in the meantime, will be guarded by a few folks that I pay a small sum to protect…
Interesting.
But wait, you say, let’s acknowledge the facts:
- GLD, the largest gold ETF by AUM, is up 46.81% YTD (as of 9/30/25)
- I’ve heard gold can help hedge against inflation and may add diversification benefits
- There must be some reason why gold is always being talked about on CNBC
Source: Bloomberg; data as of 9/30/25.
Rewinding the Gold Tape
As I mentioned earlier, gold is coming up as much as I can remember in recent memory and it is not the least bit surprising. The last major ‘gold craze’ was during the 1980s, and much like then, there’s a kernel of reason prompting the hysteria: the world is watching our country’s increasingly reckless fiscal antics and seeing significant inflation potential on the horizon. This stimulates fear that the purchasing power of the dollar will continue to decline…enter the gold = inflation hedge narrative.
On top of that, because of its recent run of form, I’m afraid many have discarded gold’s horrid long-term track record as an investment and failed to investigate beyond the convenient investment comparisons trumpeted by financial journalists. I’m not sure we can even call it an investment, but if we do, it has been one of the absolute worst out there since the last gold craze.
Rewind the tape to January 1980, $1,000 invested in gold, left to compound, is now ~$7,500. The same $1,000 invested in the S&P 500 Index, left to compound and reinvesting the dividends produced by the companies in the index, is now ~$196,830. For those counting, that is 26x the nominal ending wealth.
Sources: Bloomberg; S&P Dow Jones Indices; data as of 9/30/25.
Despite recent developments, that horrid run of form gives me great pause. Finally, let’s explore what gold does while we hold it.
What Does Gold Produce?
Sometimes the path to success for a business seems obvious, other times it is not. Yet, Richard Branson described it succinctly: “a business is simply an idea to make other people’s lives better.” And increasingly, the businesses that make up the stock market have delivered products and services to make people’s lives better and in doing so, have shared some of the profits with their investors (you and I).
If we choose to throw history to the wind and base our decisions solely on first principles, gold’s hill becomes even steeper. Gold might be nice to look at for a minute or two, but it doesn’t innovate, create, or improve. It just sits there. So, it makes intuitive sense that innovative companies may have a higher expected return than an inert asset like gold.
CONSIDER
Meaning is not something you stumble across, like the answer to a riddle or the prize in a treasure hunt. Meaning is something you build into your life. You build it out of your own past, out of your affections and loyalties, out of the experience of humankind as it is passed on to you, out of your own talent and understanding, out of the things you believe in, out of the things and people you love, out of the values for which you are willing to sacrifice something. The ingredients are there. You are the only one who can put them together into that unique pattern that will be your life. Let it be a life that has dignity and meaning for you. If it does, then the particular balance of success or failure is of less account. – The Road to Self-Renewal by John Gardner
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Let’s get after it this week!
Brooks
Brooks Palmer, CFP® is Head of Investments at Root where he helps identify, evaluate, and implement investment solutions tailored to clients’ needs. In Full-Court Press, he breaks down what’s happening in the markets—cutting through the noise and jargon—while connecting it to Root’s core investment tenets so you can make the most of your money and your life!
Data as of 9/30/25. Index returns are unmanaged and not directly investable. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The information presented is for educational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.
Advisory services are offered through Root Financial Partners, LLC, an SEC registered investment adviser. The views expressed are those of the author as of the date indicated and are subject to change without notice. Data sources include Bloomberg and S&P Dow Jones Indices. Index performance is shown for illustrative purposes only and does not represent the performance of any specific investment.