When inflation eats into your purchasing power, where should you turn—gold or stocks? Both are popular investment options, but they serve very different purposes. Gold preserves wealth during inflation, while stocks offer long-term growth that can outpace it.
Akshat Shrivastava, founder of Wisdom Hatch, wrote in a post that gold has long served as a trusted store of value, especially during periods of market instability. Stocks, however, represent real businesses that drive economic growth and productivity.
Over the past 25 years, gold has delivered a return of 12.55%, while equity (BSE Sensex) has returned 10.73%. However, on a 5-year rolling basis, the Sensex shows an average return of 14.63%, with a maximum of 55.26% and a minimum of -7.91%. Gold, in comparison, averaged 10.28%, with a high of 27.88% and a low of -4.78%.
Comparing both assets in view of inflation, Shrivastava wrote on X: “Gold does NOT compete with stocks. Stocks are a ‘risk on’ assets. When someone wants to take more risk with their portfolio, they go and chase stocks. Why? Unlike gold, stocks have a real use case. Companies that make up the stock market: are actually producing something of value.”
Giving details, he elaborated on both the assets and noted:
1. Gold is a store of value, not growth
Gold is traditionally seen as a “safe haven” asset. When the world feels risky—geopolitical tensions, economic downturns, or rapidly falling bond values—investors tend to shift towards gold.
For instance, the recent sharp decline in U.S. 20-year Treasury bonds (once considered “risk-off” assets) pushed many investors to seek alternatives like gold. It preserves purchasing power in times of uncertainty, but doesn’t generate value in the way productive assets do.
2. Gold doesn’t compete with stocks
Gold and stocks serve different purposes. Stocks are “risk-on” assets—investors buy them when they’re seeking higher returns and are willing to tolerate volatility.
The key difference? Stocks represent real businesses that create real economic value. Think about Microsoft: it created Excel, a tool that boosts global productivity. That kind of value generation fuels economic growth—and investor returns.
Gold, while valuable and useful in limited industrial or ornamental contexts, does not actively contribute to productivity.
3. Inflation outlook and your investment strategy
With rising global debt and governments (including the U.S.) openly prioritizing growth, inflation is an almost inevitable consequence.
When inflation rises:
Cash loses value quickly
You face two options:
Preserve purchasing power — turn to gold
Grow your capital faster than inflation — invest in stocks
4.Why stocks offer better inflation protection
Over the long term, stocks have consistently outpaced inflation thanks to earnings growth, innovation, and adaptability. Gold may outperform in crises, but equities dominate over decades. Gold protects. Stocks grow.
In inflationary times, owning both may help, but stocks remain the superior long-term hedge due to their productive and growth-oriented nature. A balanced portfolio may help, but stocks remain the superior long-term hedge.
