Gold has been a store of value for centuries, and in today’s world it can still play a helpful supporting role in a well-built investment portfolio, particularly for investors concerned about inflation and global uncertainty.
Why consider gold today?
For most investors, the goal is not to “bet” on gold, but to use it as a complement to traditional holdings like shares and bonds. Gold often behaves differently from these assets, especially in times of stress. Studies on multi-asset portfolios show that even a modest allocation to gold has historically reduced overall ups and downs and improved the balance between risk and return.
Gold’s role: diversification and protection
Gold’s main contribution is diversification: it tends to have a low or sometimes negative correlation with major stock and bond markets, meaning it does not usually move in lockstep with them. When shares have struggled in past crises, gold has often held its ground or risen as investors sought safer assets.
The chart above shows inflation-adjusted gold prices alongside US inflation over time. It helps illustrate an important point in the article: gold has often helped preserve purchasing power over longer periods, but it does not move in lockstep with inflation from one year to the next.
Gold and inflation: what history shows
Gold’s reputation as an inflation hedge comes from long stretches when it has helped preserve purchasing power, especially during extended periods of high inflation and weak real interest rates. However, the relationship is not perfect or immediate. Long-term studies suggest that gold is better viewed as an inflation hedge over very long horizons and during major inflation waves, rather than a precise, year-by-year protection against every increase in the cost of living.
Performance over the last 10 years
Over the past decade, gold has delivered strong overall returns, though with meaningful swings along the way. From early 2016 to early 2026, the gold price in US dollars rose by roughly 270%, helped by years of low interest rates, periodic inflation scares, and repeated phases of geopolitical tension.
International and currency exposure
Gold is traded globally and quoted mainly in US dollars, which gives it a built-in international character. For investors whose portfolios are heavily tilted toward their home market, adding gold can introduce an extra layer of global diversification that is not tied to the fortunes of any one country or company. Gold can also help when a local currency weakens: in such periods, the price of gold in that currency often rises faster than in dollars, providing a partial cushion against currency losses.
How much gold, and in what form?
For most long-term investors, gold works best as a small but purposeful sleeve within a diversified portfolio, rather than a dominant holding. Because gold does not pay interest or dividends, it is generally best viewed as a form of long-term insurance and diversification, sitting alongside, not replacing, growth assets such as shares and income-producing bonds.