A backtest of a 60% stock, 20% bond, 20% gold mix delivered a 9.86% annualized return from 2004–2026, compared with 7.94% for a traditional 60/40 stock-bond portfolio. The gold-enhanced allocation trimmed its worst drawdown in 2022 to 14.47%, versus 16.9%, while raising the Sharpe ratio to 0.70 from 0.58.

Gold’s value drivers differ from equities and bonds, acting as a store of value that tends to appreciate when fiat currency purchasing power declines. Its slow supply growth through mining and lack of yield ties gold’s performance to inflation trends and currency debasement, providing low correlation to traditional assets.

Investors using the gold ETF gain exposure to gold’s inflation hedge and diversification benefits without direct bullion ownership. Incorporating GLD into balanced portfolios may enhance risk-adjusted returns and reduce volatility during periods of rising rates and inflation.