Holding gold has historically been more psychologically challenging than holding U.S. equities, despite gold’s role as a portfolio hedge, according to analysis shared by crypto market commentator Bill Qian.

Looking at data from 1971 through 2025, following former U.S. President Richard Nixon’s decision to end the gold standard, the S&P 500 delivered positive annual returns in 44 out of 55 years, meaning investors experienced capital appreciation roughly 80% of the time.

Gold, by comparison, posted gains in 34 years and declines in 21 years, translating to positive performance in about 60% of years and negative returns in 40%. From a behavioral finance perspective, this makes gold harder to hold, as investors tend to be loss-averse and perceive losses as more painful than gains.

However, gold’s appeal lies elsewhere: low long-term correlation with equities. This diversification benefit is why Ray Dalio consistently recommends allocating 5% to 15% of a portfolio to gold as part of his all-weather investment framework.

Correlation Is High Now — But Historically Unstable

At present, the one-year rolling correlation between gold and the S&P 500 sits near 0.82, reflecting a shared “currency debasement” narrative, where investors simultaneously buy quality equities and gold to hedge against fiat currency risk.

Historical data suggests this relationship is highly unstable. Long-term quantitative analysis shows that equity price movements explain only about 24% of gold’s volatility, underscoring gold’s independence over extended cycles.

Gold’s Real Value Appears During Market Stress

Gold’s defining characteristic emerges during periods of severe equity stress. Since 1971, in years when the S&P 500 declined, gold outperformed stocks 88% of the time.

A notable example was the 2008 global financial crisis, when gold rose 21% while equity markets suffered deep losses. This tendency to decouple during crises reinforces gold’s role as a tail-risk hedge, rather than a growth asset.

While equities remain superior for long-term wealth accumulation, the data highlights why gold continues to play a strategic role in diversified portfolios — especially during periods of financial instability.