Does Gold Hold Value? | New Investor Guide

Posted - December 5, 2023
does gold hold value

Gold has been the go-to for financial advisors for generations. If you’ve spoken to an investment expert, chances are that they’ve recommended gold as a way to diversify your portfolio. We can’t blame them. Gold bullion bars and coins can help you maintain profitability – even if the traditional economy enters a recession. 

However, investors should be aware of the pros and cons of investing in gold bullion. Gold is not always profitable. In fact, gold has sometimes been outperformed by other investment classes, including stocks and cryptocurrency. Does gold hold value well? 

When does gold hold value? In today’s Bullion Academy blog, we’re outlining everything you need to know about how to invest in gold. As always, we recommend that investors interested in cheap gold coins and bars check out our expansive gold inventory. 

Why is Gold Valuable?

Before we answer today’s question, “does gold hold value,” we should really start with the basics. Why is gold valuable in the first place? Some investors take gold for granted and assume that it’ll always be valuable to investors. 

But in order to really understand why gold holds its value, we need to take a look at why gold is valuable at all. Three main things help give gold a steady reputation as a valuable commodity: scarcity, beauty, and investor demand. 

Scarcity 

Scarcity is the most important element behind gold’s value. We don’t have to remind you – gold is rare. It’s one of the rarest materials on Earth, which helps to make it among the most valuable precious metals money can buy. 

Gold’s scarcity, or rarity, is important because it gives gold intrinsic value. We’ll use this term a lot in this guide, so let’s define it. Intrinsic value means that a commodity has fundamental value before market speculation plays its hand. Most assets, such as stocks and bonds, are primarily valuable because investors believe them to be valuable. 

Intrinsically valuable commodities, on the other hand, are fundamentally valuable. Gold is both rare and extremely useful, which means that it holds intrinsic value. 

Beauty 

We don’t need to spend much time talking about this one. Does gold hold value? Yes. Gold holds value because it is rare, but also because of its beauty. As a beautiful precious metal, gold has always been valuable to investors. Even in Ancient Egypt, gold and silver were considered status symbols and used to store wealth – and not just in trades. Archeological evidence all throughout human history shows that gold has almost always been considered one of the most beautiful natural resources on the planet. 

Does gold hold value just because of its beautiful appearance? Appearance isn’t the only thing that helps give gold its intrinsic, consistent value for collectors. Next, we’ll outline how investor demand helps gold to hold its value. 

Investor Demand 

Why does gold hold value? Investor demand for the precious metal certainly helps make gold the powerhouse investment tool that it is. Supply and demand dynamics are always important when we evaluate investments. 

Valcambi 1 oz Gold Bar Serial Number
Valcambi 1 oz Gold Bar

Demand for gold is always high. Gold isn’t just used to make gold coins, bars, and jewelry. Gold finds a place in hundreds of industries. Even space exploration technology, electronics, and dentistry tools use gold. 

Supply and demand for gold can wax and wane, but interest in the world’s most popular precious metal is always pretty high. People all over the world from hundreds of industries use gold to make the things that consumers need and love. 

Gold Historical Price Trends 

Does gold hold value historically? Yes and no. Gold is a volatile commodity, which means that its value is relatively inconsistent. During some time periods, gold outperforms almost every other investment class. At other times, gold is outpaced by the very traditional assets that it seeks to overcome. 

Still, does gold hold value? Historically, the answer is yes. Gold tends to hold its value over time – or even appreciate, if the right economic conditions are met. 

Let’s take a few moments to compare gold to other investment types. Does gold hold value better than stocks, cryptocurrency, or other precious metals? We’ll compare gold to the other popular investment options below. 

Does Gold Outperform Stocks? 

Does gold hold value better than the S&P 500? The answer is… sometimes. As Investopedia points out, gold sometimes outperforms the top 500 stocks on the market. Other times, gold fails to reach the level of profits associated with traditional stocks and bonds. 

Most investment experts agree that the gold vs. stocks debate depends mostly on what time period you choose to survey. During periods where the market is down and the economy is in recession, gold tends to be a much better bet than traditional assets like stocks and bonds. 

But during periods of economic stability and security, traditional investments like stocks are usually going to be your biggest winner. As always, the answer depends on who – and when – you ask. Does gold hold value compared to other investments? Maybe, but it depends. 

South African Gold Krugerrand 1 oz Reverse
South African Gold Krugerrand – 1 oz

Gold Vs. Crypto: Which is the Better Investment? 

Stocks and bonds aren’t the only alternative that gold investors have. Cryptocurrencies like Bitcoin, Ethereum, and Litecoin exploded onto the investment scene in the early 2000s. These digital currencies eventually become more than just a novelty. 

An entirely new class of young investors have used cryptocurrency to find profit while the traditional markets flounder. But does gold hold value better than cryptocurrencies? 

The answer is (surprise, surprise) very complicated. On one hand, cryptocurrencies have frequently outperformed the value of gold in the past couple of decades. 

It’s important to note one thing, though. Digital blockchain currencies like Bitcoin haven’t been around for all that long. Compared to gold, silver, and other precious metals, these investments are just babies. Comparing them directly to precious metals is likely impossible. 

Does gold hold value, or are you better off putting your money on crypto? Cryptocurrencies offer a higher degree of volatility than gold. Even more importantly, cryptocurrencies can theoretically depreciate to zero. This is because they might not have the intrinsic value that gold has. 

Comparing Gold to Silver

We can’t only compare gold to other assets. There’s another comparison that we need to take a look at before we can really settle the debate on how gold compares to the other popular investment vehicles on the market. 

How does gold compare to silver? Silver is also a volatile commodity, and it tends to be even less predictable than gold. This might have a lot to do with silver’s industrial applications. Gold is used in certain technologies, but most of its demand comes from the precious metal’s industry. 

Volatility and Price Action 

Volatility is something that gold and silver both share. Silver tends to be more volatile than gold. Does gold hold value more consistently than gold? Yes and no. Gold has been more expensive than silver for decades, and this probably won’t change in the future. Its prices tend to move a bit less from day to day – at least where percentage movement is concerned. 

Liquidity and Recognizability 

We really can’t pick a winner between gold and silver when it comes to liquidity. As long as you’re buying popular, recognizable gold and silver products, you’re likely to find a buyer for your precious metals once it’s time to sell. 

Liquidity should be a major concern in your investment journey. Gold and silver are both good choices, especially if you plan on diversifying your portfolio and protecting your stack against the ravages of inflation. After all, both gold and silver are considered safe haven investments. 

Is Gold Too Volatile? 

Is gold too volatile for your portfolio? We’ve taken some time to answer today’s main question, does gold hold value, so we’ll finish up our blog with a bit of information about gold’s notorious volatility. 

Investment experts should always warn their clients about the risks of investing in precious metals. The value of gold can change overnight, and not always for the positive. Sometimes, developments in the mining industry might cause gold to become scarcer, driving its price up. 

2023 1 oz American Gold Buffalo Coin Reverse
2023 1 oz Gold Buffalo Coin

Other times, investor faith in the traditional markets can collapse the price of gold. This makes for a rocky road if you’re an investor depending on gold to keep your portfolio as profitable as possible. Does gold hold value despite its volatility? Let’s answer this common investing question by assessing your risk tolerance and time horizon. 

Assessing Your Risk Tolerance 

Risk tolerance is exactly what it sounds like. Your risk tolerance refers to how comfortable you are with taking risks in your portfolio. A higher risk tolerance means that you might make more money faster, but it also means you could lose money just as quickly. 

On the other side of the fence we have a low risk tolerance. Investors with a low risk tolerance aren’t likely to lose very much money, but their gains will be slow and steady. 

What should your risk tolerance be? The traditional advice depends on your age. Younger people generally have a higher risk tolerance, because they could use the financial gains and can recover from taking losses in the short term. 

If you’re older and close to retirement, the last thing you want is to lose a large portion of your investment portfolio. This means taking a lower risk tolerance. 

Does gold hold value? Gold’s capacity to hold value in the long term makes it a great choice for investors with a low to moderate risk tolerance. Even investors who want to avoid risk entirely should consider adding a bit of gold, silver, and platinum to their portfolios. When properly leveraged, these safe haven assets can protect your investment portfolio from the effects of inflation. 

Investment Time Horizon Considerations 

Time horizon is also an important factor we can use to determine if gold is right for your investment portfolio. Again, this term is really just what it sounds like. Time horizon refers to how long you plan on holding your investments before selling. 

2023 1 oz American Gold Eagle Coin Reverse
2023 1 oz American Gold Eagle

Like risk tolerance, your time horizon is informed at least partly by your age. Younger people have a lot of time on their hands, so they boast a long time horizon. But old folks who are close to retirement have a short time horizon. 

Does gold hold value in the long or short term? If you’re betting on gold, you’ll want to work on a long time horizon. Gold tends to be volatile in the short term, but it’s pretty good at holding value on a long enough time horizon. This is why so many oldschool investors recommend keeping gold for decades before deciding to sell. 

Is Gold the Best Safe Haven Asset? 

Does gold hold value better than other assets? In other words, some investors wonder if gold is the best safe haven asset. We’re reluctant to call gold the very best safe haven investment on the market. 

Other precious metals like gold and silver tend to perform very well as safe haven assets. All of the bullion products on Hero Bullion’s website tend to help diversify your portfolio and prevent inflation from crashing the value of your stock. 

Even if gold may not be the undisputed champion of safe haven assets, it is a great way to expand your portfolio’s diversity and improve the likelihood of your investments remaining in the green for years to come. 

Final Thoughts: Does Gold Hold Value? 

So does gold hold value? The answer is a yes – but with a few important qualifications. Gold holds its value very well, especially if we choose to track it on a long timeline. But in the short term, gold is one of the most volatile assets on the market – all precious metals tend to be. 

Still, gold does hold its value over time. For decades, gold and silver have been premier investment vehicles for people who want to expand their portfolio’s diversity with quality precious metal products. 

Is gold right for you? Contact us for more information about our expansive inventory of gold, silver, and platinum products. 

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About The Author

Michael Roets is a writer and journalist for Hero Bullion. His work explores precious metals news, guides, and commentary.