This is a long-term chart of gold in USD terms versus the S&P 500, with the magenta line showing the index performance. Since 1971, gold has returned over 7000%, while the S&P 500 has delivered around 5800%. Yes, with dividends reinvested, S&P 500 might be higher—but even without income, gold has outperformed purely on price appreciation, defying the popular market narrative.
Contradictions in Market Thought Leadership
Interestingly, while Warren Buffett has long ridiculed gold as a “pet rock” or a “non-productive asset,” his own father was a strong advocate of the gold standard. The shift in perspective is curious, especially since gold has proven to be a reliable performer across many decades.
Historic Turning Point: August 15, 1971
That was the day President Nixon unpegged the US dollar from gold. Until then, countries could exchange dollars for gold at $42/oz. But with rising global demand for gold redemption and limited US reserves (just 8,000 tonnes), that system was scrapped. Gold was then free to trade and its price exploded—from $42 to over $800 in less than a decade.
Multi-Decade Cycles in Gold
After that initial mania, gold went into a long slump. Central banks began selling gold aggressively, which kept prices subdued for nearly 20 years. Then came another multi-fold rally in the early 2000s. Gold rose from around $250 to nearly $2,000 by 2011—an 8x move. From 2016 to now, gold has tripled again. Historically, major rallies have followed long periods of consolidation, and this pattern seems to be repeating.
What Comes Next?
If history rhymes, and past multiples of 8x to 25x are any guide, we may not have seen the end of this cycle. From 2016 levels, gold has already moved 3x. If this leg were to go 8x or more, we could be looking at a major re-rating in price. This throws a challenge to the prevailing idea that only equities are wealth builders.
Why Gold Still Matters
Equity proponents have aggressively dismissed gold and real estate over the past few decades. But this “narrative dominance” has perhaps deprived investors of true portfolio diversification. Gold has repeatedly proven to be a solid hedge against equity downturns, currency devaluation, and systemic shocks.
The INR Perspective and Portfolio Rebalancing
The story gets even more compelling when viewed in INR terms. While the dollar rate of gold may fluctuate, INR gold has been far more stable and continues to hit new highs. Indian investors should evaluate their gold allocation more seriously. Many advisors still recommend only 2–3%—this might need to be revisited.
WeekendInvesting launches – The Momentum Podcast
Join Yassar, a Dubai-based engineer turned investor, as he shares his 15-year journey—from Wall Street dreams to mastering systematic trading. In this debut episode, Yassar and Alok dive into real estate, gold, crypto, and key lessons for navigating markets.
