Why gold is a safe-haven investment during inflation and market volatility

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When the stock market dips and investors are concerned about inflation, gold's price tends to increase.

Gold has historically held its value and increased in price over time, making it a useful long-term investment tool.

Investors can use gold as a safe-haven asset by buying physical gold coins or bars, gold exchange-traded funds (ETFs), or gold mining stocks.

Gold is a safe-haven investment, meaning its value remains steady or even increases during periods of economic uncertainty. Unlike stocks, the price of gold isn't tied to a single country or company, and gold has been a valuable asset for centuries.

Portfolio diversification and stability : Gold often holds its value or rises when stock and other asset prices fall. When inflation rises or the dollar falls gold's price stability offsets a weaker dollar and market volatility.

Potential tax advantages with a gold IRA : Eligible precious metals held in an IRA receive the same tax treatment as other IRA investments. With a traditional IRA, investment gains generally aren't taxed while they remain in the account; taxable distributions are generally subject to ordinary income tax. Qualified Roth IRA distributions may be tax-free.

Gold can be relatively liquid : Gold is generally easier to buy and sell than less-liquid physical assets such as real estate or collectibles. How quickly you can sell and the price you receive depend on the type of gold, dealer, and market conditions.

When the economy is volatile, such as during recessions or periods of high inflation, investors turn to gold. Over time, gold's price has steadily increased . In 2016, gold's price was $1,250 per ounce. As of June 2026, the price of gold was over $4,000 — its price more than tripled over 10 years.

Safe-haven investments tend to hold onto their value or even appreciate during economic downturns. Common safe-haven investments include gold, government bonds, and cash accounts.

The goal of a safe-haven investment isn't necessarily generating high returns. Instead, these investments provide protection against market dips and rising inflation. A safe-haven investment provides a financial anchor and helps investors preserve wealth.

Safe-haven investments aren't risk-free. All investments, including gold, have some risk. But, compared to other investment options, safe-haven investments tend to provide more stability.

Gold's reputation as a safe-haven investment is based on several factors: its finite supply, uses, and historical performance. These properties cause gold to perform differently from other assets.

Gold's supply is limited . According to the World Gold Council , nearly 220,000 tonnes of gold has been mined, and there are about 54,000 tonnes of gold in unmined gold reserves.

As a result, there is an inherent scarcity to gold, giving it more inherent value. Since gold can't be printed like currency, it tends to hold its value better than cash.

Gold's value isn't limited to one government or company

When you invest in stocks or bonds, your investment has some risk tied to a specific company or government. The performance of your investment depends on that single entity's performance.

Gold works differently. It's not tied to one country or company, and it's prized by many cultures. Consequently, it's particularly appealing during periods of geopolitical crisis.

Historically, gold has held onto its value

For centuries, gold has been prized as a means of preserving wealth. Despite wars, economic recessions, and revolutions, gold has steadily increased in value.

For example, even during the Great Depression — a global economic downturn that lasted from 1929 to 1939 — gold performed well. While the stock market struggled during this period, gold's price increased from $20.63 in 1929 to $34.42 in 1939 — a 67% increase.

How did gold perform during periods of economic volatility?

A safe-haven investment preserves its value during periods of instability. Over the past 50 years, gold has faced several major tests:

The Federal Reserve defines the Great Inflation as a period from 1965 to 1982, during which inflation rates skyrocketed, surpassing 14% in 1980.

With inflation rates so high and eroding purchasing power, investors turned to gold to preserve their wealth, driving demand to surge. In 1965, gold's price was just $35.12 per ounce. But by 1982, its price was more than 10 times that amount, reaching $376. Investors who had opted to invest in gold profited greatly from the higher demand.

Between 2007 and 2009, the U.S. economy experienced a deep, sustained recession. During this time, home values crashed, the stock market declined, and unemployment rates increased.

But gold continued to deliver results for investors. In 2007, its price was $695.39. In 2009, its price was $972.35 — an increase of nearly $300 per ounce.

The onset of the COVID-19 pandemic triggered a significant decline in the stock market. The market dropped about 35% between February and March 2020. By contrast, gold was resilient. Although the price of gold dipped slightly — from $1,687 per ounce on March 6, 2020, to $1,472 on March 17, 2020 — its decline was much smaller than the stock market's, and gold's price quickly recovered. By the end of 2020, gold's price was nearly $1,800 per ounce.

In 2026, inflation remains a major concern for investors. As of June 2026, the inflation rate was 4.25%, well above the Federal Reserve's target of 2%. Rising inflation has pushed more investors into gold, helping drive its price upward.

How does gold compare to other safe-haven assets?

Gold is a popular safe-haven investment, but how does it compare to other assets like U.S. Treasury securities or bonds? Here's how gold measures up.

U.S. Treasury securities are issued by the U.S. Department of the Treasury, and they are backed by the full faith and credit of the U.S. government.

One of the best-known safe-haven assets from the U.S. Treasury bonds are Series I savings bonds ( I bonds) .

Unlike gold, I bonds produce interest. However, the returns of a bond may flag behind gold's growth, and they only earn interest for 30 years.

Investment-grade bonds are less volatile than stocks, and unlike gold, may produce regular dividend or interest income. When interest rates are falling and conditions are relatively stable, bonds may outperform gold, but gold tends to hold its value better when inflation is high.

The importance of diversifying your portfolio

Although gold has historically held onto its value, it should complement your broader portfolio. Unlike other investments, gold doesn't generate income or compound over time. And over long stretches of time, gold's performance can lag the stock market, so it's best as a stabilizing factor in your portfolio.

In general, experts recommend putting no more than 15% of your portfolio into precious metals like gold, but the exact allocation depends on your age, investment goals, and risk tolerance.

Gold is usually a safe-haven investment because it has historically held its value. However, its price can be volatile in the short term, so it's best to think of gold as a safer, long-term investment that is a slice of a broader portfolio.

Why do investors buy gold when the stock market falls?

When the stock market declines, many investors turn to gold because they view precious metals as more stable. It provides investors with confidence when they lose trust in the stock market.

Is gold better than cash during periods of inflation?

Generally, yes, gold is better than cash during periods of inflation. While inflation erodes the purchasing power of cash, gold has historically held or even increased its value.

How much gold should I have in a diversified portfolio?

In general, financial experts recommend allocating between 5% and 15% in your portfolio. That allocation provides a hedge against inflation and market volatility while still allowing your portfolio to grow and generate income.

Can I own physical gold in my retirement account?

You can own physical gold in a retirement account by opening a self-directed individual retirement account (IRA). Self-directed IRAs, also known as gold IRAs, allow you to invest in gold, but you must store your gold with an approved custodian.

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