Goldman Sachs stated that investors rushing into gold for safety might be making a significant mistake.
Despite gold's dramatic surge over the past 12 months, this hasn't deterred investors from seeking gold exposure in 2026—however, an investment strategy team at Goldman Sachs does not favor the precious metal as a portfolio diversification tool.
In its 2026 Outlook report, the investment strategy team from Goldman Sachs' wealth management business warned, "Gold has historically experienced deep and sustained drawdowns, with a maximum drawdown reaching 70%." The following chart illustrates this clearly by comparing it to the U.S. bond market, a traditional buffer for portfolios during turbulent times.
Brett Nelson, head of tactical asset allocation for the investment strategy team at Goldman Sachs, stated during a media briefing on the 2026 Outlook that, based on historical data, "gold has exhibited higher volatility than U.S. equities, significantly larger drawdowns, and has only effectively hedged inflation—i.e., generated real returns—in roughly half of all 20-year rolling periods."
In contrast, he pointed out that within the same timeframe, "U.S. equities have consistently outperformed inflation," as shown by the tracking data in the chart below.
According to data from FactSet, investors poured back into a popular exchange-traded fund offering gold exposure on Monday, injecting $950 million into SPDR Gold Shares. This massive inflow reversed the fund's outflow trend for 2026; FactSet data shows net subscriptions of $118 million year-to-date.
After surging nearly 64% in 2025, this ETF has continued to rise this year, marking its strongest annual gain since its launch in late 2004. According to FactSet, last year's surge far exceeded its previous largest annual gain, which was over 30% in 2007.
Based on Tuesday's mid-day U.S. stock trading levels, the gold ETF has risen over 6% year-to-date, outpacing the U.S. stock market's gains in 2026.
The Wells Fargo Investment Institute said in a report on Tuesday that it expects gold to rise further in 2026, driven partly by market factors such as "heightened geopolitical tensions and aggressive purchasing activity by global central banks."
The Wells Fargo Investment Institute stated that the Federal Reserve's anticipated interest rate cuts this year and a stable U.S. dollar should help drive gold's outperformance in 2026, "albeit at a slower pace than in 2025."
According to Goldman Sachs' 2026 Outlook report, its investment strategy team is overweight U.S. equities.
"Unless you have a very high conviction about an impending recession, it's difficult to be underweight U.S. equities," Nelson said. He noted that "the economy ultimately supports earnings," adding that "the S&P 500 index will ultimately follow the path of earnings."
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