Why Gold Can Stay Stuck for Years — But Stocks Bounce Back Faster
Gold has this reputation as a safe-haven: when things get frothy in financial markets, people rush to it. But here’s the catch: when gold retreats or sits out the action, it often stays out for years. Meanwhile, stocks crash hard sometimes, but they tend to bounce back faster. Let’s lay out the numbers and then check what’s happening now. Separately see: What’s Next After MP Stock’s 5X Surge?
Historical data recap
- Back in early 1980, gold peaked around US$ 850/oz, then entered a long slump, not breaking that level again for many years.
- Similarly, after its 2011 high (U.S. $1,900/oz) gold went sideways for most of the rest of that decade.
- On the stock side, the S&P 500 (S&P 500) has long-term average annual returns around 10% (before inflation) over many decades.
- When stocks crash (2008, 2020, etc), the recovery often comes in 2-5 years, not decades.
Gold’s “pause” after peaks is often much longer. So: gold = good for insurance or hedge. Stocks = growth engine. But growth comes with risk.
Present-day snapshot
Here’s how things look recently:
Gold prices have shot up almost 50% in the last one year — it’s actually rallied strongly recently. Many of the usual themes (geopolitical risk, low interest rates, inflation fears) are pushing it. The 12-month total return for the S&P 500 is around 16%. Historically, the S&P has averaged 10% (pre-inflation) over the long term. So stocks are performing decently; not runaway, but solid.
These episodes show a common theme: gold tends to crash when the Fed or broader markets shift unexpectedly—either because inflation fears fade, interest rates rise, or speculative excess unwinds. Resilient demand is one of the factors we take into account in our High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 105% since inception.
What’s next?
Given the current backdrop, here are some possible “what-ifs” for gold and stocks:
Gold
- With gold already up strongly, the “hedge” logic is working: risks are elevated (geopolitics, inflation, central bank moves) so people are buying gold.
- If real interest rates stay low or negative (meaning inflation > bonds yield), gold has the tailwind to keep going.
- But if the global economy picks up strongly, inflation cools, and yields go up, gold might lose some luster and could “pause” again (i.e., flat for years) as investor attention shifts back to growth assets.
- So gold could keep climbing moderate amounts if risks persist — but there’s also a risk it gets stuck again once the panic fades.
Stocks
- The recent 16% return is healthy but doesn’t imply “easy going forever.” If earnings growth supports it, stocks can push higher.
- Key risk: if inflation stays high, central banks react with higher rates → borrowing costs up → earnings squeezed → stocks stumble.
- On the flip side: if inflation is under control, economies expand, tech/innovation continues, stocks could see a stronger phase of rebound (especially if we had a recent correction).
If stocks do correct (say 10-20%), history suggests after the panic, the rebound tends to come faster compared to gold’s long hibernations.
So how to think about this as an investor?
If you are buying gold now, know you’re buying insurance. If the skies get worse, you’ll feel good. If skies clear, you might be left getting a low (or flat) return for several years.
If you are in stocks, you’re buying growth. You accept the risk of crashes, but historically you get faster recovery.
Balanced approach: maybe some allocation to both — gold for “just-in-case,” stocks for “let’s grow.”
Summary
In short: gold is currently doing well (strong rally), while stocks are doing decently. But the core theme remains: when gold retreats, it can stay in neutral for many years; stocks may crash, but often come back faster. The next few years will depend heavily on inflation, interest rates, global growth, and investor sentiment.
If you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >105% returns since inception.
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