Gold and the S&P 500 raced alongside each other through 2024, with the precious metal and the stock index finishing the year up about 26%. The recent performance of the gold price and the stock market continues to fuel investor debates about which way to go: gold vs. S&P 500.
As you’re thinking about investing in 2025, you might be weighing the benefits and risks of each of these assets. Here is a comparison of gold vs. S&P 500 to help you decide whether to add gold or the stock index to your investment mix.
Side-by-Side Comparison of Gold and the S&P 500
Here’s a side-by-side comparison of investing in gold vs. the S&P 500:
| Aspect | Gold | S&P 500 |
|---|---|---|
| Type of Investment | Tangible asset (physical or ETF) | Index fund of the 500 largest US companies |
| Risk Level | Generally lower risk, though it can be volatile in the short term | Higher risk, tied to broader market performance and economic conditions |
| Returns | Steady long-term growth, but lower average returns compared to stocks | Higher potential returns, historically around 7-10% annually (long-term average) |
| Liquidity | Highly liquid, can be bought/sold globally with ease | Very liquid, can be bought/sold on exchanges at any time |
| Volatility | Lower volatility, though subject to geopolitical and inflationary pressures | Higher volatility, affected by market sentiment, economic data, and company earnings |
| Income Generation | No income unless investing in gold-backed ETFs that pay dividends | Dividends (from S&P 500 companies) and capital appreciation |
| Diversification | Serves as a hedge against inflation and economic crises, but not diversified by itself | Highly diversified across sectors and industries, broad exposure to the US economy |
| Inflation Hedge | Strong inflation hedge, maintains value during periods of high inflation | Can be affected by inflation, but often grows with the economy and can hedge in periods of moderate inflation |
| Investment Horizon | Long-term wealth preservation, safe haven during crises | Long-term growth, ideal for building wealth over time |
| Initial Cost/Access | Can be expensive, particularly for physical gold, but ETFs provide lower-cost access | Accessible with lower initial investment, ETFs and fractional shares allow for small investments |
| Taxation | Capital gains tax (depending on jurisdiction), sometimes taxed as collectibles | Capital gains tax and dividend tax (depending on jurisdiction) |
| Market Timing | Less sensitive to short-term market fluctuations, driven by long-term trends | Sensitive to market conditions, economic cycles, and corporate earnings |
Understanding Gold Investments
Gold has been coveted for millennia for its intrinsic value and its ability to hold that value continues to make gold a popular investment choice today.
Historically, investors have turned to gold as a haven during economic uncertainty and market volatility. Modern investors seek gold to diversify their investment portfolios, adding the precious metal as a potential hedge against inflation and a store of value that could preserve their wealth as the value of money drops.
During some economic downturns, such as the global financial meltdown of 2008–2010, gold has maintained its value and risen in price as global equity markets suffered substantial losses.
Pros
- Hedge against inflation
- Safe-haven asset
- Portfolio diversification
- Liquidity
- Tangible asset
Cons
- No generation of passive income
- Fees for storing and insuring
- Capital gains tax
Understanding Investing in the S&P 500
Many investors choose to invest in company shares because of the potential for high growth over time, and stocks have long been a foundational asset for building any portfolio.
Many investors buy and hold stocks as a long-term strategy in the hope of seeing significant returns; historically, stocks have outperformed other asset classes, such as gold, bonds and real estate.
Pros
- High growth potential
- Dividend income
- Liquidity
- Low barrier to entry
Cons
- Market volatility
- Risk of losses
- Capital gains tax
Comparing Gold Investments vs. the S&P 500
To help you decide whether you might invest in gold or stocks, here’s a comparison of the S&P 500 vs. gold, focusing on liquidity, volatility, regulation, tax liability and security.
Liquidity
Liquidity measures how quickly an asset can be bought or sold in the market and converted into cash. Gold and stocks in the S&P 500 are both considered to be highly liquid.
Demand for gold is rarely low, so it is considered a liquid asset. This applies especially to gold paper assets, such as the stocks of gold mining companies and gold exchange-traded funds (ETFs).
In contrast, bullion gold (actual gold bars and coins) is considered less liquid because of the logistics of finding buyers and transporting the items. However, commodity markets for trading gold are primarily available 24 hours a day from Sunday through Friday.
Most stocks in the S&P 500 are highly liquid. You can move these stocks quickly to adjust your portfolio as your goals change and market conditions evolve. U.S. stock markets are open from 9:30 a.m. to 4:30 p.m. Monday through Friday.
Volatility
Generally, gold experiences less volatility than the S&P 500. That means its price swings less dramatically than that of the stocks in the S&P 500. This lower volatility makes gold a stable value, so it’s considered a haven.
Regulation
In the U.S., gold is regulated by several agencies: the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC).
Additional agencies oversee other segments of the gold chain: the Bureau of Land Management (BLM) for mining laws, the Environmental Protection Agency (EPA) for environmental laws and the Internal Revenue Service (IRS) for tax laws. State-level departments and attorneys general may be involved in enforcing these laws.
In the U.S., stocks are primarily regulated by the SEC. Other agencies overseeing the financial markets are the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC), which oversees financial institutions, and the Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers.
Regulations can impact liquidity and perceived safety in markets. Clear and robust regulation can inspire investor confidence and stability in both markets, while complex and inconsistent rules can lead to volatility and investor hesitation.
Tax Liability
The IRS categorizes physical gold as a collectible. If you sell bullion gold after holding it longer than a year, you’ll have to pay a capital gains tax of up to 28%. This is significantly higher than the 20% maximum capital gains tax you’d pay for selling a stock after a year.
Security
Investing in physical gold means storing it somewhere safe and protecting it against theft or loss. You can store your gold in a safe in your home, a bank safety deposit box, or a vault. Where you store your gold affects the risk of your asset being lost, damaged or stolen, with a vault being the costliest but least risky option.
Storage and insurance are additional costs you wouldn’t have with gold mining stocks or gold ETFs.
There are several cybersecurity risks associated with online trading, brokerages and investment accounts when investing in the S&P 500. You face potential attacks from malware, ransomware, phishing and social engineering, and threats from bad actors inside financial institutions.
To protect yourself, you must use strong passwords, keep your antivirus software up to date, backup your data, monitor your network, and only use reputable trading sites with strong regulatory and compliance standards.
Gold vs. S&P 500? Which Investment Is Right for You?
If you’re thinking about your investment strategy and financial goals for 2025, you might consider investing in gold rather than the S&P 500, given the performance of both assets in 2024.
While past performance is no indication of future performance, this comparison of how factors like liquidity, volatility, regulation, tax liability and security affect investing in gold vs. S&P 500 can help you decide which investment might be right for you.
Frequently Asked Questions
Does gold outperform the S&P 500?
Gold can outperform the S&P 500, particularly during periods of high inflation or when the market is stressed. However, historically, stocks have outperformed gold over time.
What is the 20-year return on gold?
Sources vary slightly, but most report that the average annual return on gold over the last 20 years has been between 9.2% and 9.8%, which is in line with or slightly better than the S&P 500. The total return on gold from 2004 through 2024 was between 484.7% and 543%.
Is there anything better than the S&P 500?
Because it is heavily weighted toward technology companies, the NASDAQ 100 has often outperformed the S&P 500, although the index comes with more volatility.
You could also consider small-cap index funds that offer potentially higher returns, sector-specific exchange-traded funds or actively managed funds. When choosing a fund, follow your risk tolerance.
About Sarah Edwards
Sarah Edwards is a finance writer passionate about helping people learn more about what’s needed to achieve their financial goals. She has nearly a decade of writing experience focused on budgeting, investment strategies, retirement and industry trends. Her work has been published on NerdWallet and FinImpact.