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Many investors believe that gold is a safe long-term investment that can be used to hedge against risk. But should you include this precious metal in your retirement portfolio? Gold can be a highly volatile asset, with an unpredictable price that rarely correlates with stable growth. And this makes it a poor choice for the kind of dependable, long-term investing that retirement demands. Here’s what you need to know.
A financial advisor can help you create a financial plan for your future.
The History of Gold as an Asset
Gold is a commodity, which is defined as a raw material like an agricultural product, a mineral or ore. Investors buy commodities largely for two reasons. In some cases, they want the commodity for practical purposes. For example, a roaster might buy coffee futures because they want to use those coffee beans and are trying to set their prices in advance of taking physical possession of the beans. In other cases, investors may want the commodity for financial purposes. For example, a fund might buy coffee futures because they think the price of beans will go up and they intend to sell this contract when it does.
For financial investors, the value of a commodity is based on its market price. This market price, in turn, is determined by a wide variety of factors. If you invest in agricultural commodities, for example, the weather and growing season can determine current prices. A bumper crop will drive prices down, while huge storms can wipe out crops and drive scarcity, pushing prices up. Prices will depend on the use of a commodity, with demand pushing prices up as customers want more of a given product, as well as technology, politics, production bottlenecks and any other number of issues.
But, put simply, the more people want something and the less of it there is, the more investors can expect those prices to rise.
Precious metals of all classes are commodities as well, and gold is a raw material. However, it occupies a unique place among commodities. People invest in gold, well, mostly because it’s gold.
Gold is almost entirely associated with the history of money. For thousands of years, nations around the world used gold and silver as the basis for their coinage and monetary systems. Gold has always been particularly popular due to its specific chemical nature. This metal does not tarnish or wear out the way that most metals, such as silver, do; a gold brick from 1,000 years ago might be dusty, but it will be just as luminous as the day it was minted. It is soft enough to shape relatively easily, even with ancient methods. It is common enough to use in money, but rare enough to have value.
Perhaps most importantly of all, it has almost no other practical uses. The same malleability and rarity that makes gold good for coins also makes it almost useless for any form of metallurgy or construction. You can’t build with it or use it for a weapon or armor, which means that an active economy won’t consume its stock of gold over time. This makes it a relatively stable store of value.
Today, no modern economy uses gold as the basis for its monetary system. This practice became obsolete during the industrial revolution with the modern experience of economic growth. Miners can only pull gold out of the ground so quickly. In a medieval economy this was a largely stable system, since economies grew slowly by modern standards.
Once economies could count on significant annual growth, though, a nation’s productive capacity quickly began to outstrip its supply of precious metals, and therefore its money supply. (Basically, if your GDP grows by 2%, you need miners to literally dig 2% more gold out of the ground every year to keep prices steady.) This was a recipe for long-term deflation, coupled with bouts of inflation any time a gold rush struck. That in turn led to financial instability and recession, which was why most nations informally obsolesced their gold standards in the 19th century and formally did so in the 20th.
Today, gold as an asset derives most of its value from this historic tie to money. It has some limited properties as a semiconductor, as well as uncommon uses in pharmaceuticals, but overall a modern economy consumes very little gold for production and manufacture. Jewelry is the most common use, but this is ultimately a form of wearable storage. You can melt down a ring and return it to the market at little cost and with no change to the underlying metal.
As a result, gold’s main use is still as a store of value. People hold it not for its inherent utility but for what someone else will give them in exchange for that gold at a later date. Like any other investment asset, if the price of gold increases over time it is a good investment. If prices decrease over time, it is a bad one.
How Does Gold Perform as an Investment?
The problem with gold is that its price changes unpredictably. It has more volatility than the market at large, with fewer predictors, and is much more likely to enter periods of decline. Where the stock market may briefly decline during a recession, it will then resume growth based on overall economic growth. But gold can lose its value and often takes years to recover lost ground.
Like almost every other asset in the U.S. economy, gold has undergone a very rapid expansion. For most of the late 20th century, it was valued at around $400 per ounce and fluctuated within a range of about $100. Then, starting in the early 21st century, the price of gold shot upward. In March of 2025, gold reached a record high of $3,074.50 per ounce.
This would be a strong argument in favor of gold as an investment, except that the same rapid expansion has happened across stocks, bonds, real estate and most other major assets. The economy has simply grown quickly and, with it, the investors’ ability to place their money in assets. The Dow Jones Industrial Average has nearly quadrupled in value from what it was worth in the late 90s, and real estate prices have doubled in the last 10 years alone.
At the same time, gold’s price is highly volatile. While over a period of decades it has generally grown along with the economy, at any given moment it has experienced rapid price swings. Between 2011 and 2014, for example, the price of gold moved from around $1,400 per ounce to nearly $1,900 per ounce, then down to around $1,200 per ounce. In 2016 prices surged from below $1,100 per ounce to nearly $1,400 per ounce and then back down to nearly $1,100, all over the course of one year.
Between 2020 and 2023, the price of gold moved freely between $1,700 and $2,000. This is a 15% margin that has shown no stable direction of growth, but fluctuates seemingly at random.
Much of this unpredictability is driven by the fact that gold is a commodity without utility. Any other commodity can be priced, if nothing else, based on demand in the marketplace. If you are sitting on barrels of coffee beans, you can predict some price stability based on how much people want coffee. This is only one element in a complicated pricing system, but it provides a baseline for trade. No matter what else happens, Starbucks is going to need a minimum amount of beans to meet demand. Even other precious metals, like silver, platinum and palladium, have industrial uses that affect their prices.
Not so with gold, where the price of this asset is almost entirely determined by what other investors choose to pay for it.
The only significant predictor to the price of gold as an asset is that it tends to move counter-cyclically to the stock market. People usually invest in gold when times are bad, and liquidate gold when times are good. Prices per ounce climbed while the market fell in 2007, and generally did quite well in the middle of 2020. For many investors, this is an asset of last resort.
When Should Retirees Invest in Gold?
Retirees might consider investing in gold as a way to diversify their portfolios and protect against market volatility. Gold often holds its value and can act as a safeguard against inflation and currency devaluation, making it a prudent choice during uncertain economic times.
However, your timing is important. It’s beneficial to invest when you anticipate economic instability or when inflation rates begin to rise, as gold prices typically increase during these periods. This makes gold a strategic asset for preserving wealth when other investments might be losing value.
Despite its advantages, retirees should balance their gold investments with other assets to maintain a well-rounded portfolio. This approach could help you manage risk and provide a mix of growth potential and security.
When Should Retirees Avoid Gold Investments?
Retirees should consider avoiding gold investments when the market is experiencing high volatility and prices are inflated, as the potential for significant price corrections could result in losses.
Seniors should also keep in mind that gold does not yield dividends or interest, which means it doesn’t generate ongoing income that can be important for those depending on their savings to cover daily expenses.
Moreover, the costs associated with investing in physical gold, such as storage and insurance, can diminish its practicality as a retirement asset. These expenses can cut into the overall returns from gold, making it less attractive when compared with other investment vehicles that might offer better growth or income opportunities.
Finally, during periods of strong economic growth and stability, other investment options like stocks or real estate typically outperform gold. In such times, retirees might benefit more from investments that not only appreciate but also provide income through dividends or rent.
Other Investments to Consider Besides Gold
If you want to diversify your investment portfolio beyond gold, here are five other investments that you may consider:
- Stocks: Individual stocks can provide significant growth opportunities and dividends, contributing positively to your financial growth.
- Bonds: Bonds are a safer investment choice compared to stocks, as they offer a fixed return through interest payments, adding a steady income stream to your financial assets.
- Real estate: Real estate investments, whether through direct property ownership or REITs, can offer dual benefits of rental income and capital appreciation, making it a lucrative component of a diversified investment strategy.
- Mutual funds: Mutual funds allow investors to pool their money in a diversified portfolio managed by professionals, which can mitigate risk while still providing access to a broad range of securities.
- Certificates of deposit (CDs): For those seeking a risk-averse investment, CDs offer a secure way to earn interest over a fixed term, typically higher than regular savings accounts, without exposure to market volatility.
Bottom Line
Gold is generally not a good investment, especially not for a retirement portfolio. While it is somewhat useful as a counter-cyclical asset, and it can be used as a store of value, it is volatile and periodically experiences large price drops. Investors saving for retirement should generally steer clear.
Tips for Investing
- A financial advisor can help you plan your investments for the future. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Counter-cyclical assets are an incredibly important part of any portfolio. If you have everything invested in just one asset class, you set yourself up for poor market downturns. When assessing your portfolio, it’s important to understand the types of risk that you will face.
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