Good as Gold? What the Data Really Says About Gold’s Long-run Return
Peter McGahan
Monday 10th November, 2025.
PART three in the series on gold. If gold is, as some insist at the bar to me, “the thing that never lets you down,” what does the evidence actually say about its performance?
Let me take you on a dander along the long path of gold’s returns. Bring a level head and a sceptical spirit.
There’s something deeply comforting about gold. Drop it into a stream, retrieve it a hundred years later, and it’ll still shine back at you. The weight doesn’t change. The metal doesn’t rot. You can see the ancient attraction. That permanence doesn’t guarantee growth in value. That’s the distinction too often lost when gold enters the bar chat.
Which brings us to Roy Jastram, a professor and monetary historian who took a forensic look at gold’s true character. In his book ‘The Golden Constant’ (if you fancy a read), first published in the 1970s, Jastram sifted through centuries of data to understand whether gold truly holds its purchasing power over time.
His conclusion? Gold doesn’t grow wealth. It preserves it. It’s neither a sprinter, or a climber. It’s a vault, sometimes shut tight for decades, waiting for a financial storm to pass.
Over 50-year-plus spans, Jastram found that gold broadly kept pace with inflation. That’s it. A gold sovereign tucked away in 1715 could, give or take, buy you the same basket of goods in 1800.
Gold’s inflation-fighting reputation doesn’t hold up in every era. Quite the opposite. In periods of high inflation, precisely the moments when people flee to gold, its performance often disappointed. Why? Because for much of its history, gold’s price was fixed. You couldn’t wake up and find your sovereign worth 20 per cent more. The peg held it still, even as prices soared around it.
In the 1910s, gold holders lost real purchasing power. In the deflationary 1840s, they gained. The myth that gold always rises in tough times doesn’t hold up when you look at the full record. It’s more nuanced. Gold preserved. It didn’t leap.
That all shifted in 1971. Nixon’s decision to suspend the gold standard, announced on a Sunday night, released gold from its peg. It was no longer money; it was a free agent. And like any newly liberated asset, it made the most of its moment.
Inflation surged in the 1970s, and gold bolted, racing from $35 to $850 an ounce in less than a decade. For a brief, gleaming moment, it looked like the believers were right.
But then came the hangover.
From 1980 through to the early 2000s, gold didn’t just stagnate, it declined in real terms. Allowing for inflation, gold didn’t pass its early-1980s high until last year. Indeed, from 1980 through to the year end of 2019, Gold returned 197 per cent and the S&P500 returned 8242 per cent.
Investors who jumped in at the peak waited decades to recover their purchasing power. Gold wasn’t dead. But it reminded everyone that patience, not excitement, is its real nature.
So how does gold stack up against the alternatives? Over the long haul, equities, especially global ones, have comfortably outperformed. The S&P 500, despite its many tantrums and crises, has delivered generous real returns, bolstered by dividends, innovation, and growth. Gold, in contrast, just sat there with no dividends, no corporate takeovers. Just weight.
But this is where nuance returns. During market meltdowns like Black Monday, the dot-com crash, the 2008 financial crisis, gold often held its ground or even climbed. It doesn’t party, but it also doesn’t panic. In overall portfolio terms, that makes it useful.
Finance often comes down to opportunity cost. Yes, if you’d put everything into gold, you’d have missed the bull runs. But you’d also have missed the gut-churning crashes. Gold didn’t make you rich, but it helped you sleep, with a bit of hope in there too.
So, what is the “golden constant”? Not outperformance. Not fireworks. Not even reliable short-term inflation protection. It’s time. Gold works best not over months or even years, but across generations. It’s the key you bury in the garden, not for yourself, but for those who come next.
That doesn’t mean gold has no place in a modern portfolio. But let’s be honest about what it is. It’s not a lottery ticket. When everything else is being revalued or unravelled, gold just is.
In a world built for immediacy, that kind of restraint might be rarer than gold itself.
I will write a guide to ‘investing’ into Gold. If you’d like a complimentary copy, please call 01872 222422 or email info@wwfp.net and we’ll send you a copy when it’s published.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
