Investors have long considered gold a beneficial asset during periods of uncertainty. Yet, historically, it has generated long-term positive returns in both good and bad economic times. Its diverse sources of demand give gold a particular resilience and the potential to deliver solid returns in various market conditions (Figure 1). Gold is, on the one hand, often used as an investment to protect and enhance wealth over the long term, but on the other hand it is also a consumer good, via jewellery and technology demand. During periods of economic uncertainty it is the counter-cyclical investment demand that drives up the price of gold.During periods of economic expansion, the pro-cyclical consumer demand supports its performance.
Figure 1: Gold’s sources of demand
Average annual net demand = 3,181 tonnes* (approx. US$351bn)
Strat ass 2026: Figure 1: Gold’s sources of demand
Sources:
ICE Benchmark Administration,
Metals Focus,
World Gold Council; Disclaimer
*Based on 10-year average annual net demand estimates ending Q4 2025. Includes: jewellery and technology net of recycling, in addition to bars & coins, ETFs and central bank demand, which are historically reported on a net basis. It excludes over-the-counter demand owing to limitations in data availability. Figures may not add to 100% due to rounding. US dollar value computed using the 2025 annual average LBMA Gold Price PM of US$3,431.5/oz. **Net jewellery and technology demand computed assuming 90% of annual recycling comes from jewellery and 10% from technology.
Looking back over more than half a century since the US gold standard collapsed in 1971, the price of gold in US dollars has increased by 9% on an annualised basis – a performance comparable with that of equities and higher than that of bonds over the same period. Gold has also outperformed many other major asset classes over the past 1, 3, 5, 10 and 20 years (Chart 1).
Chart 1: Gold has performed well over the past 1, 3, 5, 10 and 20 years, despite the strong performance of risk assets
Annualised return over the past 1, 3, 5, 10 and 20 years*
Case for Gold 2026: Chart 1 USD
Sources:
Bloomberg,
ICE Benchmark Administration,
World Gold Council; Disclaimer
*Returns from 31 December 2005 to 31 December 2025. Indices used: US Cash: ICE 3-month Treasury; US treasuries: Bloomberg US Treasury; US, Global ex US, and EM stocks: MSCI US, World ex US, and EM total return indices, respectively; Commodities: Bloomberg Commodity Total Return Index; and Gold: LBMA Gold Price PM (spot).
The fact that gold has performed so well is no coincidence. Our research shows that the gold price over the long term is primarily driven by an economic component balanced by a financial component. We call this approach Gold’s Long Term Expected Return (GLTER).
GLTER’s robust framework builds upon the composition and drivers of above-ground gold stocks. The model suggests that gold’s long-run return closely mirrors global GDP and is, therefore, materially higher than inflation. This also implies that gold should be viewed as an asset that can positively contribute to long-term portfolio returns, supplementing its well-established role as a hedge.
Moreover, the diversity of its sources of demand help to make gold a less volatile asset than some equity indices, other commodities or alternatives (Chart 2).
Chart 2: Gold has been less volatile than many equity indices, alternatives and commodities because of its scale, liquidity and diverse sources of demand
Annualised daily volatility of major assets since 2005*
Case for Gold 2026: Chart 2 USD
Sources:
Bloomberg,
ICE Benchmark Administration,
World Gold Council; Disclaimer
*Annualised volatility is computed based on daily returns in US dollars between 31 December 2005 and 31 December 2025. Indices used: Bloomberg Global Aggregate Bond Index; Bloomberg Commodity Index; MSCI Daily Gross World Index; LBMA Gold Price PM; MSCI Daily Gross EM; MSCI USA Index; S&P Listed Private Equity Index; FTSE Nareit Equity REITs Index USD; Bloomberg WTI Crude Oil.
Beating inflation, combating deflation
Gold has long been considered a hedge against inflation and the data confirms this: since 1971 it has outpaced the US and world consumer price indices (CPI). Gold also protects investors against high inflation: in years when inflation was between 2% - 5%, gold’s price increased 10% per year on average. This number increased significantly with even higher inflation levels (Chart 3). Over the long term, therefore, gold has not just preserved capital but helped it to grow.
Chart 3: Gold historically rallies in periods of high inflation
Gold nominal and real returns in US dollars as a function of annual inflation*
Case for Gold 2026: Chart 3 USD
Sources:
Bloomberg,
ICE Benchmark Administration,
World Gold Council; Disclaimer
*As of 31 December 2025. Based on y/y changes in US dollars for ‘gold’: LBMA Gold Price PM and ‘inflation’: US CPI since January 1971. Over that period, there have been 13 instances of low inflation, 30 of moderate inflation and 11 of high inflation.
Our research also shows that gold has the capacity to do well in periods of deflation. Such periods are characterised by low interest rates, reduced consumption and investment, and financial stress, all of which tend to foster gold investment demand.
Store of value
Historically, major currencies were pegged to gold. That changed with the unravelling of the US gold standard in 1971 and the eventual collapse of the Bretton Woods system. Since then, with few exceptions, gold has significantly outperformed all major currencies and commodities. And although this outperformance was particularly marked immediately following the end of the gold standard, gold has continued to outperform most major currencies in the more recent past (Chart 4). A key factor behind this robust performance is that the above-ground stock of gold grows slowly over time, at a rate of 1.7% per year over the past 25 years. In contrast, the money supply of currencies has increased at the significantly higher rate of 7.3% over the same period.1
Chart 4: The purchasing power of major currencies and commodities has eroded significantly relative to gold
Value of currencies and broad commodities relative to gold (January 2000 = 100)*
Case for Gold 2026: Chart 4
Sources:
Bloomberg,
ICE Benchmark Administration,
World Gold Council; Disclaimer
*As of 31 December 2025. Relative value between ‘gold’: LBMA Gold Price PM; ‘commodities’: Bloomberg Commodity Index; and major currencies since 2000. Value of commodities and currencies measured in ounces of gold and indexed to 100 in January 2000.
Fiat money can be printed in unlimited quantities to support monetary policy. This is clearly exemplified by the quantitative easing (QE) measures implemented in the aftermath of the Global Financial Crisis (GFC) and the COVID-19 pandemic. These crises saw many investors turn to gold in order to hedge themselves against currency devaluation and preserve their purchasing power over time.
The environment catalysed by QE created optimal conditions for gold to perform well, tracking the rapid expansion in US money supply (Chart 5).2
Chart 5: Gold prices have tracked the expansion of US money supply
US M2 growth, US CPI and gold price*
Case for Gold 2026: Chart 5
Sources:
Bloomberg,
ICE Benchmark Administration,
World Gold Council; Disclaimer
*As of 31 December 2025. US CPI and US M2 were constructed using data from January 1972 and re-based to 100 on January 1972. Gold based on the LBMA Gold Price PM USD.
Money supply includes M2 from 5 countries: US, China, ECB, Japan, UK, all in US$, indexed to Q3 2000. The above-ground stock of gold methodology can be found here: How Much Gold Has Been Mined? | World Gold Council
This is also consistent with the results from GLTER, given the link between money supply and economic growth.
