New Poll Shows Americans Want to Invest in Gold More Than Stocks. Here's Why We Wouldn't Recommend It

When asked what is the best long-term investment by Gallup, Americans have traditionally favored real estate and stocks to other choices, like certificates of deposit (CDs) and bonds. And while Americans are still enthusiastic about real estate in 2023, the last year of bear market blues has given precedence to an old favorite: gold.

Roughly 26% of Americans surveyed by Gallup believe gold is the best long-term investment, an opinion that has nearly doubled since 2022 when 15% placed gold above stocks and real estate. By contrast, only 18% of Americans surveyed in 2023 believe stocks and mutual funds are the best investment, down from 24% in 2022.

Both gold and stocks still rank behind real estate, which was answered as the best investment by 34% of respondents in 2023 and 45% in 2022.

The shift in opinion is hardly surprising. After all, commodities like gold have traditionally been perceived as safe havens in turbulent times. But the fact that so many Americans are placing gold above stocks raises the question -- is gold a better investment in 2023 than stocks and mutual funds? I don't think so. Here's why.

The S&P 500 has outperformed gold over long periods

Let me be clear: Gold as an investment isn't inherently bad and has helped investors hedge against stock market volatility. But when we compare its performance against the S&P 500 over long periods, stocks more often than not come out as clear long-term winners.

For example, let's look back 40 years ago at the price of gold and compare it to the share value of the S&P 500. In 1983, gold had an average closing price of about $423, while the S&P 500's average closing price was roughly $160. Thus far in 2023, gold has had an average closing price of $1,934, which means gold has appreciated roughly 357% over 40 years. Meanwhile, the S&P 500 has had an average closing price of $4,067 in 2023. Using that as our ending point, the S&P 500 has risen 2,441% in value since 1983, almost seven times more than gold.

Even when we narrow our time period to the last 10 years, the S&P 500's average closing price has still appreciated more than gold. In 2013, the S&P 500's average closing price was roughly $1,643, while gold's was closer to $1,409. Compared with this year's average closing price (so far), the S&P 500 has risen about 148% since 2013, while gold's price has appreciated by 37%.

Gold has outperformed the S&P 500 in bear markets, but not in bull runs

Admittedly, gold can outperform the S&P 500 for certain periods, especially during bear markets and recessions. For example, between 2007 and 2010, the price of gold appreciated from an average closing price of $696 to $1,227, rising roughly 76%. In contrast, the S&P 500 during the same period depreciated by about 23%, from an average closing price of $1,477 in 2007 to $1,139 in 2010.

But during bull markets, the reverse is true: The stock market typically outperforms gold.

Take, for example, the bull market between 2009 and 2020. During that now legendary bull run, the S&P 500 rose from an average closing price of $948 in 2009 to $3,217 in 2020, or a 239% difference. Gold didn't perform so badly either, rising 82% from an average closing price of $973 to $1,773. But between the two, the stock index was a clear winner.

What about in 2023? While it's still early to tell, the S&P 500 does appear to be entering a bull market, after closing 20% higher on June 8 than its lows in October 2022. If that's the case, now is not the time to sell stocks for gold. Based on history, it would make more sense to deposit money in your brokerage account and invest in the stock market than buy bullions of gold.

Want a compromise? Consider gold stocks

Gold stocks are companies who mine for gold or who provide funding for gold mining enterprises and earn royalties on the minerals that are extracted. You can buy shares in gold stocks through most online brokerage accounts, though you should do your research beforehand. These stocks aren't always the best long-term investments, as gold mining is expensive and mining stocks can be volatile. Even so, exposing a portion of your portfolio to gold companies could prove beneficial, especially if Americans are preferring the yellow metal to stocks lately.