State Street declares gold must-hold asset

Gold has climbed from roughly $2,600 per ounce in early 2025 to nearly $4,750 as of April 2026, producing its strongest stretch in over four decades. Most investors still treat gold as a panic button, buying in turmoil and selling once it passes.

State Street Global Advisors, which manages approximately $5.4 trillion in assets globally, is pushing back on that mindset. The firm published a comprehensive research report making the case that gold deserves a permanent place in a diversified portfolio. 

The data stretches back decades, and the conclusions could change how you structure your own investments.

State Street builds a three-pillar case for permanent gold exposure

State Street organizes its argument around three pillars: risk management, capital appreciation, and wealth preservation. The analysis draws on Bloomberg data stretching back to the early 1970s, covering multiple recessions, rate cycles, and geopolitical disruptions.

The standout data point is gold’s monthly return correlation with the S&P 500 since the 1970s, which is exactly 0.00. Its correlation to the Bloomberg U.S. Aggregate Bond Index over the same stretch is just 0.09, according to State Street’s Bloomberg-sourced analysis.

“While gold’s share of total investor AUM has grown by around one percentage point over the last two years as prices and demand have increased, we still see the potential for this share to rise toward 4–5% over the coming years,”— Gregory Shearer, (Head of Base and Precious Metals Strategy, J.P. Morgan.)

For you, that means gold has historically moved independently of both your stock and bond holdings over full market cycles. When your 60/40 portfolio takes a hit, gold has often held steady or climbed, offering a cushion that few other assets can provide.

The diversification math behind a 2% to 10% gold allocation

State Street modeled four hypothetical portfolios with gold allocations ranging from 0% to 10%, using performance data from January 2005 through March 2025. The results were consistent across all scenarios tested: adding gold improved returns while reducing risk.

A portfolio with zero gold allocation returned 5.66% annually and had a maximum drawdown of 35.68%, according to the firm’s analysis. A portfolio with 10% gold returned 6.18% annually with a maximum drawdown of just 31.68%, according to State Street data.

The Sharpe ratio, which measures how much return you earn per unit of risk, improved from 0.38 with no gold to 0.45 with 10% gold. Cumulative returns over that roughly 20-year period jumped from about 205% without gold to nearly 237% with a 10% allocation to gold.

You earned more money while experiencing smaller losses during every major downturn in that window, including the 2008 financial crisis and the 2020 pandemic crash.

Central bank buying is creating a structural floor under gold prices

Central banks have been accumulating gold at a pace not seen in decades, and that buying is directly supporting the price level that underpins your holdings. Official sector buyers purchased roughly 863 tonnes of gold in 2025, well above historical averages but below the record of approximately 1,082 tonnes set in 2022, according to J.P. Morgan research. 

The bank expects central banks to acquire approximately 755 tonnes in 2026, a step lower than recent peaks but still far above pre-2022 averages of 400 to 500 tonnes annually. China’s central bank has been one of the most aggressive buyers in this cycle, extending its gold purchasing streak to 15 consecutive months through January 2026. 

The People’s Bank of China raised its holdings to 74.19 million ounces during that period, according to Wells Fargo’s analysis. Other emerging market central banks have followed a similar path, diversifying reserves away from U.S. dollar-denominated assets in response to tariff uncertainty and geopolitical risk.

More Personal Finance:

• Retirees following 4% rule are leaving thousands on the table
• Fidelity says a $500 policy could protect your entire net worth
• Fidelity’s 4 Roth strategies could save your family a fortune in taxes

State Street’s report reinforces this trend, noting that gold’s diverse sources of demand span both cyclical and countercyclical phases of the economic cycle. Unlike industrial commodities such as oil or copper, gold demand does not depend solely on manufacturing output. 

Jewelry consumption, central bank reserves, investment flows, and technology applications all contribute to pricing pressure from multiple independent directions at once. 

“The long-term trend of official reserve and investor diversification into gold has further to run,” Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan, said in a recent research note. “We expect gold demand to push prices toward $5,000 per ounce by year-end 2026.”

Gold’s record as an inflation hedge and dollar weakness buffer

One of the strongest arguments in State Street’s report focuses on gold’s historical performance during periods of elevated inflation across the economy. Gold has increased by an average annual rate of 10.6% when price inflation exceeded 5% per year, measured from August 1971 through March 2025, according to the firm’s Bloomberg-sourced data.

The metal has also shown a consistent inverse relationship to the U.S. dollar over the past three decades of market data. Rolling one-year correlations between weekly gold price returns and U.S. dollar index returns have averaged negative 0.42 since March 1995, according to the State Street report.

If you hold most of your wealth in dollar-denominated assets like stocks, bonds, and savings accounts, a gold allocation can help protect against purchasing power erosion. The dollar posted its worst annual performance since 2017 while gold set record after record throughout 2025 and into early 2026.

Deep liquidity means you can access cash even when other markets freeze

State Street highlights a practical advantage that many retail investors tend to overlook: gold is one of the most liquid asset classes available worldwide.

The estimated average daily turnover across exchanges, over-the-counter markets, and ETFs exceeds $232 billion, which translates to roughly $58 trillion per year, according to World Gold Council and Bloomberg data cited in the report.

During the March 2020 COVID-19 lockdown, gold trading volumes reached $237 billion even as stocks, bonds, and credit markets experienced severe liquidity problems. For you, that means gold can function as a reliable source of cash when you need to raise funds quickly during a crisis.

That liquidity advantage is one reason institutional investors and financial advisors increasingly recommend gold ETFs over physical bars and coins for most portfolios. The spread between buying and selling prices on major gold ETFs remains tight, and you can exit a position within seconds.

The trade-offs and limitations you should weigh before adding gold

Gold is not a guaranteed winner in every market environment, and you should understand the specific trade-offs before making any changes. Between 1971 and 2024, stocks averaged 10.7% in annual returns while gold averaged 7.9%, meaning equities have outperformed gold over the long run.

Key considerations before buying gold:

• Gold generates no income, which means you give up dividends and interest payments by holding it instead of stocks or bonds in your portfolio.
• Prices can be volatile in the short term, and gold experienced a 45% decline from its 2011 peak to its 2015 low over a four-year span.
• Storage and insurance costs apply if you hold physical gold, though ETFs like SPDR Gold Shares carry an annual expense ratio of 0.40%.
• Tax treatment differs from equities, as gold held in a taxable account is subject to collectibles rates of up to 28%, above typical capital gains rates.

State Street’s own research acknowledges that gold is not a replacement for equities or bonds in your portfolio, but rather a complementary allocation.

Practical steps for positioning gold in your portfolio going forward

State Street’s data points to a gold allocation between 2% and 10% as the range that has historically improved both returns and risk metrics over a 20-year period. The firm used SPDR Gold Shares (GLD) in its modeling, but similar exposure is available through lower-cost options like SPDR Gold MiniShares (GLDM).

Steps for adding gold exposure

• Start with a 2% to 5% allocation if you are new to gold, funded by trimming overweight positions in your bond or equity holdings.
• Consider using a gold ETF in a tax-advantaged account, such as an IRA, to avoid the higher collectibles tax rate that applies in taxable accounts.
• Rebalance annually to maintain your target allocation, since gold’s price swings can cause its weight in your portfolio to drift over time.
• Avoid chasing performance with a lump-sum purchase at record highs; dollar-cost averaging over several months can help reduce your timing risk.

The broader Wall Street consensus supports the structural case for gold heading into the rest of 2026 and beyond. Goldman Sachs has set a year-end target of $5,400, J.P. Morgan projects $6,300, and Wells Fargo targets $6,100 to $6,300, according to the banks’ published research.

Those targets do not guarantee returns, but they reflect a shared institutional view that gold’s underlying demand drivers remain firmly in place. State Street’s research suggests you do not need to predict where gold prices go next to benefit from holding the metal permanently.

Related: How much gold you should hold in your retirement portfolio