Throughout history, gold has shown a consistent ability to preserve value when traditional risk assets face pressure. Its performance during equity market downturns and economic slowdowns underscores its function as a stabilizer within diversified portfolios. The following analysis explores how gold and gold–equity combinations have behaved across equity and business cycles, revealing patterns of resilience that complement both growth-oriented and defensive allocations. By understanding these historical dynamics, investors can better appreciate how gold exposure, implemented thoughtfully, can enhance portfolio balance across a wide range of market conditions.

Figure 1 highlights gold's resilience during equity market stress. Across the 20 worst quarters for the S&P 500 Index since 1967, gold delivered positive returns in 15 of them. While U.S. equities often experienced double-digit losses during these downturns, such as in 1974, 2008 and 2020, gold tended to either appreciate or limit declines, underscoring its historical role as a defensive asset. The pattern reflects gold's function as a store of value and potential portfolio stabilizer when risk assets are under pressure.

Figure 1: Gold Has Exhibited Resilience in Historical Equity Downturns

In figure 2, the upper panel illustrates how U.S. equities, gold futures and a hypothetical blended 90/90 Gold Futures-S&P 500 Index portfolio¹ have performed across different equity market regimes from 1999 to 2025. These regimes are defined by monthly U.S. equity returns:² strongly negative (<–5%), negative (–5% to 0%), positive (0% to 5%) and strongly positive (>5%). The bars represent the average monthly returns of each strategy under these conditions. The data highlights that while equities experience large losses during downturns, gold and especially the blended portfolio tend to deliver more stable or positive performance, demonstrating gold's diversifying role during periods of equity stress.

The lower panel applies the same three asset groupings but organizes performance according to the OECD³ Composite Leading Indicator (CLI), which measures broad cyclical shifts in economic momentum. The CLI identifies four distinct business-cycle regimes, ranging from strongly negative to strongly positive signals, based on forward-looking indicators such as manufacturing, order books and consumer sentiment. This framework is useful because it captures turning points in global growth before they appear in traditional economic data. As shown, gold and the 90/90 hypothetical allocation have tended to perform more consistently across business-cycle phases, while equities show greater sensitivity to downturn signals.

Figure 2: Gold's Role through Equity and Business Cycles

A Capital Efficient Exposure to Gold and U.S. Equities

The WisdomTree Efficient Gold Plus Equity Strategy Fund (GDE) is designed to provide investors with an option to cover two different asset allocation concepts:

1. Sometimes, investors are considering a gold allocation, but they have concerns that over long periods of time, gold is not a business, it does not have earnings or dividends, and it might be trickier to value. They may not want to remove exposure from equities and place it in gold. With GDE, it doesn't have to be "gold or equities," but rather it can be "gold and equities."

2 . We saw in figures 1 and 2 that in rougher periods for equities, gold's price his historically held up better. While we can never guarantee that history will repeat itself, a strategy that includes exposure to U.S. equities and gold futures is designed to take advantage of these historically lower correlations.

Figure 3 helps to contextualize the structure of GDE, indicating that for a hypothetical $100 invested, a certain notional exposure is achieved.

Figure 3: Looking under the Hood of GDE

Figure 4: Standardized Returns

Considering Portfolio Allocations

Figure 5a compares a traditional 60/40 portfolio, with 60% U.S. equities and 40% U.S. fixed income,⁴ to an alternative allocation that introduces gold exposure through GDE. In this revised 50/40/10 structure, 10% of the portfolio is allocated to GDE, while equities are reduced to 50% and fixed income remains at 40%. This adjustment modestly rebalances risk while introducing an allocation designed to enhance diversification and potentially improve portfolio resilience during periods of equity or bond stress.

The second chart translates these allocations into notional asset class exposures, recognizing that GDE provides simultaneous exposure to both equities and gold futures. Specifically, a 10% allocation to GDE contributes roughly 9% equity exposure and 9% gold futures exposure, resulting in total portfolio exposures of approximately 59% equities, 40% fixed income and 9% gold futures. This structure allows investors to incorporate meaningful gold diversification without significantly diluting equity exposure, thereby maintaining growth potential while adding an asset historically uncorrelated with stocks and bonds.

Figure 5a:ETF Allocations

Source for hypothetical allocations: WisdomTree

Figure 5b: Notional Asset Class Exposures

Source for notional asset class exposures: WisdomTree. Gold, in this context, is specifically gold futures.

Conclusion: Looking at the Allocation Returns

Figure 6: Return Comparison

Figure 7: Additional Information

¹ The 90/90 Gold/SPX scenario represents a hypothetical allocation that incorporates leverage, to the tune of 180% notional exposure, combining gold futures and the S&P 500 Index. The return stream represents a leveraged sum of 90% of the returns of the S&P 500 Index and 90% of the return of gold futures.

² The universe for U.S. equity returns is the S&P 500 Index.

³ OECD stands for The Organisation for Economic Co-operation and Development.

⁴ The original 60/40 allocation uses the SPDR S&P 500 ETF (SPY) for the equity component and the iShares Core U.S. Aggregate Bond ETF (AGG) for the fixed income component. These two strategies are among the largest, based on assets under management, tracking these respective benchmarks across the U.S. equity landscape.