A portfolio can look well balanced when markets are rising. The harder test comes when growth slows, inflation climbs, or stocks fall. Do the assets you own respond differently—or do they decline together?
Philip N. Diehl, 35th Director of the U.S. Mint and President of U.S. Money Reserve, examines that question by comparing gold, stocks, and bonds across different economic conditions in the 21st century. His central argument: Gold deserves consideration beyond its familiar role during a crisis.
“You never know what is going to happen,” Diehl says. “But you can look at history and learn from it.”
Those lessons can help Americans consider how physical gold might support their goals, whether they’re seeking to help protect their portfolio from economic uncertainty, help grow their savings over time, or leave a legacy to loved ones.
Watch the Podcast Market Matchup: Stocks vs. Gold vs. Bonds in the 21st CenturyWhen stocks and bonds fall together
The traditional 60/40 portfolio divides assets between 60% stocks and 40% bonds. Part of its appeal is balance: Stocks offer growth potential, while bonds can provide income and may help cushion stock market declines.
But that relationship doesn’t work the same way in every environment.
In 2022, stocks and bonds declined together as inflation and rising interest rates challenged financial markets. Vanguard identifies that year as an example of bonds falling alongside stocks. Gold, meanwhile, finished the year with a modest 0.4% gain in U.S. dollar terms, according to the World Gold Council.
That small gain matters in context. An asset doesn’t have to post a dramatic increase to provide balance when other holdings are losing ground.
Diehl’s review also examines the dot-com downturn, the global financial crisis, and the pandemic period. He points to those episodes as reasons to consider gold’s potential role alongside conventional assets.
The lesson isn’t that bonds have no purpose. It’s that a portfolio’s ability to help manage risk depends on how its holdings behave together, especially under stress.
INFOGRAPHIC Gold vs. the 60/40 Model: What 25 Years of Market Data RevealsGold’s role extends beyond a crisis
Gold is often associated with uncertainty. But Diehl’s analysis also considers periods of slower growth and stronger economic expansion.
He highlights selected periods in which gold’s price increased even as stocks rose. That challenges the assumption that gold can only perform well when the economy struggles.
“Different assets respond to different forces,” Diehl says. “Corporate earnings, borrowing costs, inflation expectations, and demand for gold can influence their performance in different ways. A growing economy does not automatically mean a falling gold price.”
Why losses matter to long-term growth
A strong gain during an economic boom tells only part of a portfolio’s story. Losses during downturns affect how much progress remains over the full holding period.
Consider a simple example: A $100 holding that falls 20% is worth $80. It then needs a 25% gain to return to $100.
“That recovery math helps explain why people pursuing long-term growth also need to think about risk,” says Diehl. “Helping limit the impact of a downturn can matter alongside participating in rising markets.”
Diehl argues that gold should be evaluated through both lenses: its potential to help balance a portfolio during uncertainty and its potential to help grow savings over time.
Rethinking the mix beyond 60/40
Diehl favors considering a 60/20/20 mix—60% stocks, 20% bonds, and 20% gold—as an alternative starting point for portfolio discussions. The appropriate mix depends on personal goals, time horizon, income needs, and comfort with risk, and Diehl emphasizes that the appropriate allocation is a personal decision to discuss with a financial advisor.
Reviewing a portfolio means asking more than which asset performed best in a particular period. It means considering what each holding contributes and whether that combination supports the plans you’re building for retirement and your family.
Related Article Portfolio Risk After 60: A Guide to Stability in RetirementPut history in perspective
Historical comparisons can help explain how assets have behaved. They cannot establish how those assets will perform next. Results also depend on the dates, benchmarks, and return calculations used.
The useful takeaway is a question: Does your portfolio include assets that can respond differently as conditions change?
To learn more about physical gold and explore whether it’s right for you, call U.S. Money Reserve at (866) 646-8465.
