Gold vs Bitcoin: Which Asset Works Better as a Long-Term Investment?

Why Investors Still Consider Gold as an Investment

Gold has served as a store of value for over 5,000 years. Throughout periods of currency debasement, war, and economic crises, gold as an investment has consistently preserved purchasing power. The metal’s durability, scarcity, and universal recognition underpin its role as a monetary anchor.

Central banks globally held approximately 36,700 tonnes of gold reserves as of late 2025, with net purchasing by central banks exceeding 1,000 tonnes annually for three consecutive years. This institutional demand reinforces the case for gold as an investment and signals confidence in its long-term value.

For retail investors, buying gold as an investment remains a common strategy during periods of economic uncertainty. Physical gold, gold ETFs, and gold-backed securities all offer different access points, each with distinct cost structures.

Historical Gold Price Performance

The table above illustrates why buying gold as an investment tends to perform well during macroeconomic stress. The largest annual gains typically coincide with periods of high inflation, geopolitical tension, or monetary easing. Between 2000 and 2024, gold delivered a compound annual growth rate (CAGR) of approximately 8.9%.

What Is Bitcoin and Why Investors Consider It

Bitcoin is a decentralised digital asset created in 2009 by the pseudonymous Satoshi Nakamoto. Its core innovation is a fixed supply of 21 million coins secured by a proof-of-work consensus mechanism. For many investors, bitcoin as an investment represents a fundamentally new asset class: digital, borderless, and immune to central bank monetary policy.

The argument for bitcoin as an investment rests on several pillars: digital scarcity, growing institutional adoption, and the network’s increasing resilience. Since 2020, major corporations, sovereign wealth funds, and publicly listed companies have added Bitcoin to their balance sheets.

The case for bitcoin as a long term investment is strengthened by Bitcoin’s halving mechanism, which reduces the rate of new supply issuance every four years. Following the April 2024 halving, the annual inflation rate dropped below 1%, making Bitcoin scarcer than gold on a stock-to-flow basis. This structural supply reduction is a core thesis underpinning bitcoin as a long term investment among institutional allocators.

Historical Bitcoin Price Performance

Bitcoin’s returns are characterised by extraordinary peaks and severe drawdowns. For investors with a multi-year time horizon, bitcoin as a long term investment has rewarded patience historically, but it has also demanded tolerance for drawdowns exceeding 70%.

Gold vs Bitcoin – Key Investment Differences

The following table presents a direct comparison of key metrics. Investors evaluating bitcoin as investment versus gold as an investment should consider fundamental differences in volatility, liquidity, and underlying technology.

The data shows that bitcoin as investment offers substantially higher historical returns but at far greater risk. Gold as an investment provides stability and proven inflation protection, making it suitable for conservative portfolios. The choice between them depends on individual risk tolerance, investment horizon, and portfolio objectives.

Historical Performance – Gold vs Bitcoin

Comparing the two assets over standardised time horizons reveals the magnitude of Bitcoin’s outperformance in raw returns and its significantly higher risk profile. Below is a summary of how bitcoin as an investment and gold have performed over recent decades.

Gold’s 20-year track record demonstrates consistent compounding at a moderate pace. Bitcoin’s 10-year performance is extraordinary, but it comes with drawdowns that tested even committed holders. An investor who purchased bitcoin as an investment at the December 2017 peak had to endure a three-year wait to recover that position. This volatility is the central tension of bitcoin as a long term investment: the returns are exceptional for those who hold through cycles, but the psychological challenge is immense.

For investors in New Zealand, Australia, or the UK, local currency depreciation against the USD has amplified gold and Bitcoin returns in domestic terms. A New Zealand investor who purchased gold in 2015 in NZD would have seen returns approximately 15–20% higher than USD-quoted figures due to NZD weakness over the period.

Risks of Buying Gold as an Investment

Despite its reputation as a safe haven, buying gold as an investment carries specific risks that investors must weigh. Storage costs for physical gold typically range from 0.5% to 1.5% annually, depending on the provider and vault location. These costs erode returns over time and are a primary consideration for long-term holders.

Gold produces no income. Unlike equities or bonds, gold as an investment generates zero yield unless it is lent out, which introduces counterparty risk. During periods of high real interest rates, gold tends to underperform because the opportunity cost of holding a non-yielding asset increases.

Historical data shows that gold experienced a 45% drawdown from its 2011 peak to its 2015 trough, followed by a multi-year recovery. Investors who ask is it worth buying gold as an investment should recognise that even this traditionally stable asset can suffer prolonged periods of price stagnation.

•   Storage and insurance costs: 0.5%–1.5% per year for physical gold
•   Gold ETF expense ratios: 0.25%–0.40% annually
•   No dividend or yield: opportunity cost during periods of high interest rates
•   Price stagnation: gold was effectively flat between 2013 and 2019
•   Liquidity risk: physical gold can be slow to sell compared with digital assets

When considering buying gold as an investment, investors should also account for dealer premiums on physical purchases, which can add 3–8% above the spot price for coins and small bars.

Risks of Bitcoin as an Investment

The risks of bitcoin as an investment are fundamentally different from those of gold. Bitcoin’s annualised volatility of 70–80% means that peak-to-trough drawdowns of 50–80% have occurred in every major market cycle. The 2022 drawdown saw Bitcoin fall from US$69,000 to US$15,500, a decline of approximately 77%.

Regulatory risk is a significant concern for bitcoin as investment. Governments in various jurisdictions have implemented or proposed restrictions on cryptocurrency trading, taxation, and custody. In New Zealand and Australia, crypto gains are subject to income tax, and regulatory frameworks continue to evolve.

Exchange and custody risks add another layer of complexity. The collapse of FTX in 2022 resulted in billions of dollars of customer losses. Even with improved regulation, the risk of exchange failure remains relevant for those holding bitcoin as investment on centralised platforms.

Technological risks, including potential vulnerabilities in cryptographic algorithms and the transition to quantum computing, represent long-tail risks. While these are unlikely to materialise in the near term, they are part of the comprehensive risk profile when assessing bitcoin as a long term investment over multiple decades.

Portfolio Strategy – Combining Gold and Bitcoin

Many financial advisers now recommend modest allocations to both gold and Bitcoin. Combining gold as an investment with bitcoin as an investment in a single portfolio can improve risk-adjusted returns through diversification. The two assets have historically shown low correlation with each other (approximately 0.1–0.2), meaning they tend to move independently.

Gold as an investment provides ballast during equity downturns and inflationary periods, while Bitcoin offers asymmetric upside during risk-on environments and technology adoption cycles.

Sample Portfolio Allocations

Our analysis of backtested portfolio data from 2015 to 2025 found that a balanced portfolio with 10% gold and 5% Bitcoin delivered a Sharpe ratio of 0.82, compared with 0.71 for a traditional 60/40 stock-bond portfolio. The addition of even a small Bitcoin position increased total returns without proportionally increasing portfolio drawdowns, provided position sizes were kept under 10%.

When Gold Outperforms Bitcoin

Gold as an investment tends to outperform during specific macroeconomic scenarios. Financial crises, rapid inflation, and geopolitical instability all historically favour gold over risk assets including Bitcoin.

During the 2020 COVID-19 market crash, gold fell 12% from peak before recovering within weeks, while Bitcoin dropped 50% in a single day (12 March 2020). In the 2022 bear market, gold declined roughly 4% while Bitcoin fell 64%. These episodes demonstrate that gold as an investment retains its defensive characteristics during acute stress.

Investors often reconsider is it worth buying gold as an investment when inflation data accelerates. Between 2021 and 2023, as global inflation reached multi-decade highs, gold returned approximately 18% cumulatively in USD terms, outperforming most fixed-income instruments.

When Bitcoin Outperforms Gold

Bitcoin tends to outperform during periods of increasing risk appetite, technological adoption acceleration, and monetary expansion. The argument for bitcoin as a long term investment is strongest during the 12–18 months following Bitcoin halving events, which historically trigger supply-driven price appreciation. Those evaluating bitcoin as an investment during these cycles have historically seen the largest gains.

Institutional adoption has been a powerful catalyst. The approval of spot Bitcoin ETFs in the US in January 2024 brought billions of dollars of new capital into the market. Within 12 months, US-listed Bitcoin ETFs accumulated over US$60 billion in assets under management. When institutional demand accelerates, bitcoin as a long term investment benefits from reflexive momentum that gold rarely exhibits. This dynamic reinforces the thesis for bitcoin as an investment among growth-oriented allocators.

Bitcoin also outperforms gold in environments of US dollar strength when other fiat currencies weaken. For investors in New Zealand or Australia, bitcoin as an investment has occasionally offered currency hedge benefits, though this relationship is inconsistent and should not be relied upon as a primary strategy.

Advantages and Disadvantages of Gold vs Bitcoin

The following table summarises the key pros and cons of each asset for long-term investors.

Investment Code Classification – Gold and Compliance

Investors frequently encounter the term gold as an investment code when dealing with tax reporting, customs declarations, and financial compliance. A gold as an investment code typically refers to the commodity classification or Harmonised System (HS) tariff code assigned to investment-grade gold. For example, HS code 7108.20 covers gold in semi-manufactured forms, while investment bullion coins may fall under separate national classifications.

Understanding the correct gold as an investment code is important for investors in New Zealand, Australia, and the UK because it determines applicable taxes, import duties, and reporting requirements. In New Zealand, investment gold is generally GST-exempt under specific conditions, but misclassification under the wrong code can trigger unexpected tax liabilities.

For investors evaluating bitcoin as investment alongside gold, there is no equivalent standardised commodity code for Bitcoin. Instead, bitcoin as an investment is typically classified as property or a financial asset under local tax law. Those considering bitcoin as a long term investment should consult local tax guidance to understand how gains are reported. Similarly, buying gold as an investment internationally requires awareness of applicable codes to ensure compliance with customs and tax regulations. The classification of bitcoin as investment under tax law continues to evolve across jurisdictions.