Has gold really lagged stocks over time?
Not always.
This article looks at how gold and stocks have traded places across different economic periods, and why that relationship matters when building a long-term portfolio.
Gold’s ownership benefits have been debated since President Roosevelt made owning gold illegal in 1933. Investors can struggle to embrace gold ownership if they assume stocks should outperform gold by default. However, gold market prices say otherwise. Recently, post-COVID, gold outperformed stocks. If this gold-favored investment phase lasts as long as others, it would run into the 2030s.
The central question investors should ask and need to answer is: Have stocks actually outperformed gold over time?
It is a mistake to pick one of these asset classes over the other, because they perform so well together. This article is another explanation why they perform well together, while we explore the basis for the historical relationship between gold and stocks, and which has had greater gains.
How economic productivity explains gold versus stock performance
Granted, history has demonstrated that 90% of stock fund managers do not keep pace with the S&P 500, and in general, neither do individual investors. However, the S&P 500 and the Dow Jones Industrial Average serve as solid benchmarks for this quantitative analysis, though they may overstate actual stock gains in general.
Long-term differences between gold and stock performance are better explained by economic structure than by short-term market cycles.
Laws of Economics shed light on the major trends that favor gold over stocks and vice versa, namely the Productivity Law of Market Economies (1). Capital markets enable stocks to generate investment value through productivity growth, while the erosion of free-market capitalism diminishes their functional value. Gold’s ownership benefit operates in the opposite direction. Fiat currency devaluation, monetary stimulus, government expansion, fiscal mismanagement and over-regulation all tend to favor gold by weakening productive resources, namely the business private sector. These opposing forces largely explain periods when gold outpaces stocks, and when stocks regain the advantage. Neither exists in a bubble, void of external influence.
Recently, gold has outperformed stocks, since 2021, that is. The aftermath of COVID-era productivity intervention, momentous monetary stimulus, and significant bureaucratic debt spending has favored gold over company stocks. There is no telling if or when this trend will end, but history suggests it won’t be permanent.
Following World War II, stocks outpaced gains in gold for most of the period before the end of the century. Excluded from this gold-stocks phase analysis is the earlier part of the 20th century, when market measurement was distorted by two world wars and by governments dismantling gold’s role as the foundational element of money. During that period, the explicit political objective worldwide was to detach currencies from gold to establish absolute fiat control, thereby rendering true comparisons unmeasurable.
Since WWII, there have been three market phases in which gold outpaced stocks and three phases in which stocks outpaced gold. The following summary outlines the periods that favored gold versus stocks and the conditions that defined them”
| Asset Favored | Years | Phase Beginning | Phase Ending & Rationale |
|---|---|---|---|
| Stocks | 21 | 1946 Post-War | Vietnam Wartime & Keynesianism* (1967) |
| Gold | 13 | 1967 Vietnam Era | Reagan-Volcker Deregulation & Reaganomics (1980) |
| Stocks | 20 | 1980 Reagan Era | Dot-Com Bubble Ends & Gold Enlightenment (2000) |
| Gold | 11 | 2000 Gold Awareness | Era of Nearly Free Borrowing Rates (2011) |
| Stocks | 10 | 2011 Low Rates Era | Covid Interference and Massive Stimulus (2021) |
| Gold | 4+ | 2021 Covid Era | Why? (If another 10 year period, could be 2031?) |
* Note that under President Kennedy, the philosophies of Keynesianism shifted from academia into politics, as JFK sold the public on the argument that the government could manage economic cycles, yet that actually was the cause, and intensified the beauty of gold ownership.
Stocks have historically outperformed gold, before the political adoption of Keynesianism and during the Reaganomics era. More recently, and for the better part of this century as a whole, gold has outpaced stocks. This analysis reveals that markets do not move in straight lines and that investment volatility can create opportunity.
If you manage a portfolio of stocks and gold with a defined allocation to gold, such as 10%, 20%, or 30%, adding to the lagging component during a given period can create a meaningful advantage over time.
Understanding these cycles matters most when considering your precious metals allocation decisions. Take advantage of a bullion professional, and call Monex to discuss creating your own personal gold standard.
Disclaimer: This article is for informational purposes only and does not constitute investment, legal, or financial advice. Market observations are presented for educational context and should not be interpreted as recommendations.
(1) Productivity Law of Market Economies – Defined
Economic productivity, innovation, and long-term growth rise in direct proportion to the degree of (a) private ownership, (b) competitive free market pricing, and (c) profit incentive — and decline as these factors are reduced, removed, or externally controlled.
The Productivity Law of Market Economies states that when individuals and firms have ownership over their labor, capital, and the rewards of success, they naturally allocate resources toward their most productive, innovative, and value-creating uses. Private property rights create responsibility and stewardship, competitive markets create efficiency, and the profit motive drives experimentation, risk-taking, invention, and continuous improvement. In this environment, productivity is not commanded, but pulled forward by opportunity.
Conversely, when ownership is diluted, prices are controlled, or profits are reduced or centralized by a state or collective authority, the incentive to excel weakens. Productivity flattens because reward for exceptional output is decoupled from effort, misallocation persists without price signals, and innovation slows with less competition. Even well-intentioned central systems struggle to process the dispersed information that markets handle automatically through pricing and voluntary exchange. As a result, growth becomes dependent on external subsidy, coercive compliance, or unsustainable extraction of reserves — symptoms seen repeatedly in centrally planned economies.
This law does not assert that free markets are morally superior — only that they are factually more productive. The relationship is economic, not ideological. When people may own, compete, and profit, they build, but when those factors are weakened or removed, productivity declines predictably and proportionally. This simple but powerful concept explains why free-market systems void of interference grow over time, while disruption hurts businesses.
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