Comparing gold to other alternative investments
- Alternative investments march to an alternative beat—gold, commodities, liquid alts, and bitcoin behave very differently across varying markets.
- Gold’s diverse global demand allows for greater independence from economic cycles and shifts in investor sentiment.
- Understanding what drives each asset class makes it easier to see where gold may fit and why it can stand apart as a diversifier.
Alternative investments are grouped together all the time, but they don’t all behave the same. Commodities swing with the booms and busts of economic cycles. Liquid alts have become more correlated with traditional assets. And crypto…well, it’s crypto.
Gold is different.
It’s driven by a separate set of forces, which is why investors often turn to the precious metal to help diversify their portfolios.
Let’s break down how gold stacks up against other alternative investments: broad commodities, liquid alternative strategies, and bitcoin.
How to compare gold with other asset classes
The first step is to understand what drives gold’s demand, which is unusually diverse.
Alternative investments are typically driven by one or two sources of demand. Many digital assets, for example, depend on investor enthusiasm and adoption.
Gold demand, on the other hand, comes from four distinct sources:
- Jewelry (cultural and retail)
- Industrial uses (technology and manufacturing)
- Investments (ETFs, coins, bars)
- Central bank reserves (strategic long-term buyers)
These demand drivers move for different reasons, creating a blend of forces that help gold behave both cyclically and counter-cyclically (Figure 1). That’s partially why gold tends to show low correlation with other financial assets.
Between late 2020 and mid-2024, for example, gold ETF holders were net sellers—meaning ETFs were releasing gold back into the market. Normally, that would put downward pressure on prices. But even with 180–200 tonnes returning to net supply each year during that period, gold still rose 23%.1 Structural forces including demand from Asia—namely Chinese retail jewelry, physical gold buyers—and central banks more than offset that supply.2
Central banks, in particular, are quite influential in the gold market. Their buying has surged since 2022 and, unlike most investors, they’re not necessarily sensitive to price. They buy for strategic purposes: diversification, currency stability, and long-term reserve planning.
Figure 1: Gold’s dual nature
| Average annual gold demand (%) | Driver | |
|---|---|---|
| Jewelry | 47 | Cyclical |
| Industrial | 8 | Cyclical |
| Investment | 30 | Counter-cyclical |
| Central banks | 15 | Non-cyclical |
Source: State Street Investment Management, World Gold Council. Average gold demand based on full annual data for the 10-calendar year period from December 31, 2014 to December 31, 2025. The performance data quoted represents past performance. Past performance does not guarantee future results.
Broad commodities vs. gold: Why commodities aren’t a substitute for gold
Gold is often categorized as a commodity since it’s a real asset that fluctuates based on supply and demand. That said, most investors access commodities through broad commodity indexes, which is a very different experience than owning gold exposure directly.
Broad commodity indexes typically include dozens of materials: oil, copper, natural gas, wheat, industrial metals, along with gold. In fact, gold currently makes up about 7% to 14% of major commodity benchmarks,3 while the rest is heavily weighted toward energy, base metals, or agriculture. In turn, broad commodities tend to be pro-cyclical—they move with the economy.
If factories ramp up production, construction companies build more buildings. If consumers spend more, materials like oil, copper, and agricultural products typically see a rise in demand. Conversely, when the economy slows, demand for these materials can recede.
Gold’s demand doesn’t rely exclusively on industrial production or economic growth. This helps explain why broad commodity indexes show slightly higher correlation with equities, while gold has historically shown slightly lower correlation over time (Figure 2). So, if an investor’s goal is to hedge against market volatility, gold has historically filled that role more reliably than broad commodities.
Liquid alternatives vs. gold: Why liquid alts deliver less diversification
Liquid alternatives are commonly used to diversify stock-bond portfolios. They can include everything from long/short equity and event-driven approaches to REITs and private credit. And since they trade daily (with the exception of some private assets), they're often used by investors who want alternatives without locking up capital for years.
Except many liquid alts have seen their low correlations gradually rise over the past two decades, especially relative to gold (Figure 3). Since 2008, alternative asset classes—such as private equity and REITs—have become increasingly correlated to the 60/40 portfolio, potentially limiting their diversification benefits. Meanwhile, gold’s correlation has trended lower.4
Liquid alts can still complement a portfolio, they just haven’t consistently delivered the same diversification benefits that gold has.
Bitcoin vs. gold: Bitcoin has just one source of demand
Bitcoin is often dubbed “digital gold,” but the comparison is like calling a roller coaster a mode of transportation—technically true, but not exactly practical.
First, the similarities:
- Both are scarce, finite resources
- Both are expensive to mine
- Neither pays traditional dividends
Now, for the main difference. As the most well-known cryptocurrency, bitcoin’s demand comes from a single source: investor interest. People buy bitcoin because of its scarcity, technology, and long-term potential. And while its meteoric ascent has solidified an alluring narrative, that same narrative makes bitcoin extremely sensitive to changes in sentiment. New regulations or macro headwinds can all incite significant price swings, sometimes within hours or even minutes, especially during equity drawdowns (Figure 4).
That means bitcoin and gold play very different roles in a portfolio. Bitcoin is a speculative, volatile asset that depends exclusively on investor confidence. Gold is a historically proven store of value supported by a wide base of global demand, including strategic buyers like central banks.
Figure 5: A breakdown of gold versus other alternatives
| Asset class | Primary role | Correlation with stocks and bonds | Key characteristics | Demand drivers |
|---|---|---|---|---|
| Gold |
| 30y Corr= 0.31 w/ US Bonds 30y Corr= 0.04 w/ S&P 500 10y Corr= 0.43 w/ US Bonds 10y Corr= 0.09 w/ S&P 500 |
|
|
| Broad commodities |
| 30y Corr= -0.07 w/ US Bonds 30y Corr= 0.30 w/ S&P 500 10y Corr= -0.15 w/ US Bonds 10y Corr= 0.40 w/ S&P 500 |
|
|
| Liquid alternatives |
| 30y Corr= 0.03 w/ US Bonds 30y Corr= 0.75 w/ S&P 500 10y Corr= 0.29 w/ US Bonds 10y Corr= 0.84 w/ S&P 500 |
|
|
|
| 10y Corr= 0.17 w/ US Bonds 10y Corr= 0.32 w/ S&P 500 |
|
|
Source: Bloomberg Finance, L.P., and State Street Investment Management. Data as of December 31, 2025. Gold: gold spot price in US dollars. Equites: S&P 500 Total Return Index. US Bonds: Bloomberg US Aggregate Index. Broad Commodities: S&P GSCI Total Return Index, Commodities: S&P GSCI Total Return Index. Liquid Alternatives: LPX50 Listed Private Equity Index Total Return. Bitcoin: Bitcoin/United States Dollar Cross. The performance data quoted represents past performance. Past performance does not guarantee future results.
Gold continues to shine
Broad commodities, liquid alts, and bitcoin each bring something unique to the table, but gold fills a role that’s hard to replicate. Its ability to attract demand across different market environments—from jewelry buyers to central banks—is a big reason it’s behaved differently from other alternative investments and can help build resilient portfolios.
As you explore ways to diversify your holdings with gold, consider GLD®, the largest physically backed gold ETF5 or GLDM®, one of the most affordable gold ETFs.6