Posted By 
By Steve Lowrie, CFA
Special to Financial Independence Hub
Should you invest in Gold?
For most investors, no. Gold does not produce income, has delivered inconsistent long-term returns, and is not a reliable hedge against inflation or market uncertainty. A disciplined, evidence-based portfolio built on equities and bonds has historically provided more consistent growth.
Why Gold gets Attention
I tend to get questions about gold at predictable times:
- When gold or gold stocks have recently performed well, which triggers greed
- During periods of political or economic uncertainty, which triggers fear
Both are emotional responses. Neither is a reliable investment strategy.
Is Gold a Good Investment when it is Performing Well?
Not necessarily.
Gold’s price is largely driven by what is often described as the “greater fool theory.” You buy it today hoping someone else will pay more for it later.
Unlike productive assets like stocks or bonds, gold does not generate income. It does not pay dividends or interest, and it does not produce cash flow. In many cases, it also comes with costs such as storage or insurance.
Your return depends entirely on price appreciation, which is unpredictable.
What has Gold’s Long-term Return looked like?
Gold has not delivered reliable long-term returns.
Over extended periods, gold’s return after inflation has been modest and inconsistent. While there have been periods of strong performance, these gains have often been followed by long stretches of little to no real progress.
In contrast, productive assets such as global equities have provided sustained long-term growth.
Investors who try to time gold’s periods of strong performance often take on additional risk and may miss out on the more consistent compounding provided by equities.
Does Gold protect against Inflation?
Not reliably.
There have been periods where gold has outpaced inflation, but there have also been long stretches where it has not. For example, following its peak in 1980, gold experienced a prolonged period of weak performance, taking almost 20 years to recover in real or after-inflation terms.
More importantly, gold is far more volatile than inflation. Since 1970, gold has been about 10 times more volatile than inflation as measured by the Consumer Price Index.
That level of volatility undermines its usefulness as a stable hedge against rising prices.
Is Gold a Safe Haven?
This is a common belief, but the evidence is inconsistent.
Gold may perform well in certain environments, but those outcomes are unpredictable and not dependable. The idea that gold consistently protects wealth during crises is not strongly supported by data.
Much of the “safe haven” narrative is driven more by perception than by evidence.
Does Gold improve Diversification?
Less than many investors expect.
Gold and commodities do not produce income, and their returns depend on price changes. That makes their long-term outcomes less reliable than productive assets such as stocks or bonds.
A well-constructed portfolio should prioritize asset classes with positive expected returns.
Should you hold any Gold?
Only indirectly, as part of the broader market.
For Canadian investors, a material exposure to gold already exists through mining companies within the TSX Index. Unlike gold bullion, these companies generate earnings and may pay dividends. A diversified portfolio naturally includes this exposure without requiring a separate allocation.
Anything beyond that moves from disciplined investing toward speculation.
A simple framework for Decision Making
When evaluating any investment, I encourage clients to ask three questions:
- Does it produce income?
- Does it have a reliable long-term expected return?
- Does it improve portfolio outcomes in a measurable way?
Gold struggles to meet all three.
That does not make it useless, but it does make it difficult to justify as a core holding in a long-term portfolio.
A Real-World Observation
Over the years, I have had many conversations about gold in social settings.
They often follow a familiar pattern. A discussion about markets turns to gold, and someone becomes very passionate about it. These individuals are often referred to as “gold bugs,” and they tend to hold strong convictions about gold as a store of value or protection against the financial system.
In one conversation, I was told quite confidently that I was doing a disservice to my clients by not allocating the majority of their portfolios to gold.
What stood out was not just the conviction, but the certainty. In investing, that level of certainty is often where the risk lies.
What happened next is what matters.
Over the following decade, gold prices were largely flat. During that same period, a globally diversified portfolio delivered strong long-term returns.
The real cost was not just the lack of return from gold. It was the opportunity cost of missing the growth of productive assets.
That experience reinforced a simple truth. In the long run, evidence tends to be more reliable than conviction.
Bottom Line
Gold tends to attract attention during periods of greed and fear.
But when you step back and look at the evidence:
- It does not produce income or cashflow
- Its long-term returns have been inconsistent
- It is not a reliable inflation hedge
- Its diversification benefits are limited
For most investors, a disciplined approach grounded in evidence and focused on long-term outcomes remains the more reliable path.
Frequently Asked Questions
Should Canadians invest in gold?
For most Canadian investors, no. A diversified portfolio of equities and bonds provides a more reliable way to grow wealth and manage risk over time. Exposure to gold already exists indirectly through the broader market.
Is gold a good investment in Canada?
Gold may perform well over short periods, but it does not produce income and has not delivered consistent long-term returns. That makes it difficult to justify as a core investment.
Does gold protect against inflation?
Not consistently. While gold has outperformed inflation at times, it has also experienced long periods of underperformance and significantly higher volatility.
Why does gold become popular during uncertain times?
Because it appeals to fear. When markets feel uncertain, investors often seek perceived safety, even when the evidence does not support it.
Steve Lowrie is a Portfolio Manager with Aligned Capital Partners Inc. (“ACPI”). The opinions expressed are those of the author and not necessarily those of ACPI. This material is provided for general information, and the opinions expressed and information provided herein are subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on the information presented, please seek professional financial advice based on your personal circumstances. ACPI is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through ACPI or Lowrie Investments, an approved trade name of ACPI. Only investment-related products and services are offered through ACPI/Lowrie Investments and are covered by the CIPF. This article originally ran on Steve’s blog on March 27, 2026 and is republished on Findependence Hub with permission.
