Since 1971 gold has beaten inflation but trailed shares — and spent two decades losing money in between.

On 15 August 1971 President Nixon closed the “gold window”, ending the dollar’s convertibility into gold at the official $35 an ounce that had anchored the Bretton Woods system¹. From then on gold had a market price, and half a century of that price is now long enough to answer the question families ask most often about it: is gold a good long-term investment? The data says it has been a reasonable store of value, a weaker builder of wealth than shares, and an unusually good companion to shares in a crisis — with very long stretches when it lost money.

Gold, shares and inflation since 1971

After inflation, that is roughly 4.9% a year for gold and 6.9% for shares²³. The World Gold Council, which promotes gold, reaches a similar headline on its own data: about 8% a year in dollars since 1971, comparable with shares and ahead of bonds and inflation⁵. Its figure was published before 2025, a year in which gold rose 66%² and set 53 record highs⁴ — a reminder that a long-run average for gold depends heavily on where the window ends.

The average hides two droughts

Gold reached $850 an ounce on 21 January 1980 and fell to $252.80 on 20 July 1999 — a fall of about 70% over nineteen years, before counting inflation⁶. On year-end prices it did not close a year above its end-1980 level until 2006². In real terms the wait was far longer: by Barron’s calculation, the 1980 peak was worth about $3,499 in 2025 money, and gold only passed it in September 2025, around $3,656⁷. Somebody who bought at the top waited roughly 45 years to be level after inflation.

Claude Erb and Campbell Harvey’s study “The Golden Dilemma” explains why such droughts follow booms. They found gold to be a reliable inflation hedge only over very long horizons — they suggest centuries — and an unreliable one over the years and decades that matter to a household. They also found the real price of gold tends to revert towards its long-run average, so periods of unusually high real prices have tended to be followed by below-average returns⁸. Their paper, written soon after the 2011 high, was followed by exactly that: gold fell 28% in 2013 and was below its end-2012 level until 2020².

In rupees, a weaker currency changed the story

An Indian household experienced the same decades very differently, because the rupee fell against the dollar. In the Reserve Bank of India’s series, gold in Mumbai averaged ₹1,522 per 10 grams in 1980-81 and ₹4,394 in 1999-2000 — nearly three times as much — even though the London dollar price fell by about half over the same years, from $585 to $280 an ounce⁹. By 2020-21 the Mumbai price was ₹48,723, about 32 times its 1980-81 level, or roughly 9.1% a year over 40 years⁹.

That rupee cushion is real, but it is a currency effect rather than a property of gold: it is what any dollar asset did for a rupee saver while the rupee weakened. Indian shares have their own record. NSE reports that the Nifty 50 Total Return Index has compounded at 12.12% a year since its base date in November 1995, to the end of September 2026 — including a fall of 12.61% so far in 2026¹⁰. The windows differ, so these are not a like-for-like contest; over the twenty years from 2000-01 to 2020-21, the RBI’s gold series rose about 12.7% a year⁹. Start and end dates decide most comparisons between gold and shares.

Gold in Indian households

The World Gold Council estimates Indian households hold up to 25,000 tonnes of gold, much of it as jewellery passed through generations¹¹. Habits are shifting: in 2025 Indian jewellery demand fell 24% to 430.5 tonnes while bar and coin demand rose 17% to 280.4 tonnes¹²¹³, and Indian gold ETFs took in a net 38 tonnes¹³.

Jewellery, coins, ETFs and Sovereign Gold Bonds compared

• Jewellery. You pay the metal, a making charge set by the jeweller and not regulated, and GST of 3% on the whole value — the making charge included, whether or not it is shown separately¹⁴. Selling usually recovers the metal value only, so the making charge and the tax are a cost, not an investment. Its real value to a family is often not financial at all.
• Coins and bars. Closer to the metal price, with the same 3% GST on purchase¹⁴, plus storage and the purity question at sale.
• Gold ETFs and gold funds. Listed units backed by gold, bought and sold at market prices, with a yearly expense ratio deducted inside the price and no making charge or storage problem. For what a yearly charge costs over decades, see what fees cost over 30 years.
• Sovereign Gold Bonds. Issued by the RBI for the Government of India: they track the gold price, pay 2.50% a year on the amount first invested, run eight years with early exit allowed after the fifth, and capital gains on redemption are exempt for individuals¹⁵. No new tranche has been issued since February 2024, and the government has said it will not continue the scheme, rising gold prices having made redemptions costly for it; existing bonds trade on the NSE and BSE¹⁶.

Gold’s real job: a diversifier

The strongest argument for holding some gold is not its average return but its timing. The World Gold Council’s analysis finds gold’s negative relationship with shares strengthens as shares sell off: gold rose 21% in dollars from December 2007 to February 2009, and its return stayed positive through the share-market falls of 2020 and 2022¹⁷. In the yearly data, US shares fell 36.55% in 2008 while gold rose 4.32%, and in 1974 shares fell 25.90% while gold rose 66.15%².

It is not a reliable hedge in every crisis — in 2000 shares and gold both fell² — and it produces no income, so its long-run return depends entirely on somebody paying more later. The balanced reading is that a modest allocation can soften the worst years of a share portfolio, while a large one exposes a household to gold’s own multi-decade droughts. Whether and how much to hold is a household decision; this is information, not financial, tax or legal advice. For the wider case for spreading money across markets, see home bias and currency risk.

Where gold sits in your plan

One honest limit: the FIRE Planner grows your whole corpus at the return in your assumptions, not at a separate rate for gold. If a large share of your savings is gold, choosing that return with gold’s history in mind is part of setting up the plan (build your plan).