Comparative Analysis of Gold and S&P 500 Investments Over Time

Crypto KOL Bill Qian posted on X that historically, holding gold has been more challenging than holding the S&P 500. From 1971, following U.S. President Richard Nixon's televised speech, to 2025, the S&P 500 has risen in 44 out of 55 years, experiencing declines in 11 years. This means investors have seen capital appreciation in 80% of the years. In contrast, gold has increased in 34 years and decreased in 21 years, offering growth in 60% of the years and experiencing volatility in 40%. Human beings tend to be loss-averse, often perceiving losses as twice as impactful as gains. From this perspective, the 'pain' of holding gold is significantly greater than that of holding the S&P 500. However, the low correlation between the two is a notable advantage of gold. This is why Ray Dalio consistently recommends a 5%-15% allocation of gold in his all-weather portfolio. Currently, the one-year rolling correlation coefficient between gold and the S&P 500 stands at a high of 0.82. This strong positive correlation reflects the current narrative of 'currency devaluation trade,' where investors buy both quality stocks and gold to hedge against fiat currency credit risk. Historical research indicates that this relationship is highly unstable. Long-term quantitative data shows that price changes in the S&P 500 can only explain about 24% of gold's volatility (R-squared value of 0.24). Gold's core value lies in its 'decoupling' property under extreme stress. Since 1971, in years when the S&P 500 has declined, gold has outperformed stocks 88% of the time. For instance, during the 2008 financial crisis, gold rose by 21% while the stock market experienced significant downturns.