MW Investors flocking to gold for safety may be making a big mistake, Goldman says
By Christine Idzelis
Investors just poured nearly $1 billion into a popular gold ETF
Gold prices have climbed to a fresh record high in 2026.
Gold's surge over the past 12 months hasn't kept investors from seeking exposure to it in 2026 - although an investment strategy team at Goldman Sachs isn't a fan of the precious metal as a diversifier in portfolios.
In its 2026 outlook report, the investment-strategy group for Goldman's wealth-management business cautioned that "gold has realized deep and prolonged drawdowns, with a low of 70%." That's seen in the chart below comparing the performance of the yellow metal next to the U.S. bond market, with fixed income traditionally viewed as a cushion for investment portfolios during turbulent times.
GOLDMAN SACHS
Historically, "gold has higher volatility than U.S. equities, has much larger drawdowns and it's only effectively hedged inflation" - meaning producing a real return - over rolling 20-year periods about half the time, said Brett Nelson, head of tactical asset allocation for Goldman's investment-strategy group, during a media briefing on its 2026 outlook. By contrast, "U.S. equities have always outperformed inflation" over such a time frame, he noted, as tracked in the chart below.
GOLDMAN SACHS
Investors on Monday piled back into a popular exchange-traded fund that provides exposure to gold, pouring $950 million into SPDR Gold Shares GLD, according to FactSet data. That large inflow reversed the fund's 2026 outflows, with investors adding a net $118 million this year, FactSet data showed.
The ETF is up this year after skyrocketing almost 64% in 2025, booking its strongest annual gain since its launch in late 2004. The fund's surge last year trounced its next-largest annual gain, seen in 2007 when it climbed more than 30%, according to FactSet data.
So far this year, the gold ETF has rallied more than 6% based on Tuesday afternoon trading levels, surpassing the U.S. stock market's 2026 gains.
Gold prices (GC00) were edging lower Tuesday, after posting an all-time high on Monday, according to Dow Jones Market Data.
Wells Fargo Investment Institute said in a note Tuesday that it expects further upside for gold in 2026, partly on market drivers such as "heightened geopolitical tensions and aggressive purchasing activity by global central banks." Expected interest-rate cuts by the Federal Reserve this year along with a stable U.S. dollar DXY should help drive gold's outperformance in 2026, "albeit at a slower pace than in 2025," Wells Fargo Investment Institute said.
The U.S. stock market also rose to a fresh peak on Monday, with the Dow Jones Industrial Average DJIA and S&P 500 SPX each scoring all-time highs despite renewed concern over the Fed's independence, following news of the Justice Department's criminal investigation into Fed Chair Jerome Powell's congressional testimony last year. Powell suggested in a video statement Sunday that the unprecedented action was about political intimidation meant to pressure the Fed to lower rates as desired by President Donald Trump, rather than based on economic data.
The U.S. stock market was trading lower Tuesday, with Dow, S&P 500 and Nasdaq Composite COMP all down as investors weighed a fresh reading on inflation, as well as the latest quarterly earnings report from JPMorgan Chase $(JPM)$ as Wall Street banks kick off fourth-quarter earnings results this week.
Goldman's investment-strategy group is overweight U.S. equities, according to its 2026 outlook report. "It's very difficult to underweight U.S. equities unless you have very high conviction in an imminent recession," said Nelson. "The economy ultimately supports earnings," he noted, adding that "the S&P 500 ultimately follows the path of earnings."
-Christine Idzelis
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(END) Dow Jones Newswires
January 13, 2026 14:35 ET (19:35 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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