There’s something comforting about gold. It’s not just that it’s been used as payment for tens of thousands of years; it’s tangible. It’s something you can hold in your hand and know it holds value. But in today’s investing world, that old appeal doesn’t necessarily translate into smart returns. If you’ve been thinking about gold as a way to protect your money or build retirement income, it might be time to rethink that strategy. Here’s why you might want to forget gold as an investment, or at least see it for what it really is: a relic of another investing era.
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Why not gold?
Warren Buffett summed it up well years ago, stating it “gets dug out of the ground, melted down, buried again, and paid to be guarded.” It’s scarce, yes, but scarcity alone doesn’t equal growth. It doesn’t produce anything. Gold just sits there. The only way you make money is if someone pays more for it later. Compare that to a stock, which produces cash flow through earnings and dividends.
In fact, historically, gold barely keeps up with inflation over the long run. Over the last 50 years, gold has returned around 6% to 7% annually, compared to 10% to 11% for U.S. and Canadian stocks. That difference compounds dramatically over time. Plus, gold is marketed as a “safe haven,” but the data says otherwise. During many periods of market stress, gold prices don’t move as smoothly as investors hope. For example, during the early 2020 pandemic crash, gold initially fell 12% before recovering.
Gold’s reputation as an inflation hedge is mixed at best. While it sometimes rises during inflation spikes, that relationship is inconsistent. During the high-inflation years of the 1980s, gold lost nearly half its value. In contrast, quality dividend stocks tend to raise payouts during inflationary periods, actually growing your real income.
Look to gold stocks
Physical gold doesn’t pay dividends, rent, or interest. Gold stocks, on the other hand, can. Many top Canadian miners pay regular dividends, some up to 3%! These gold stocks sell gold for profit, and when prices rise, margins expand, allowing for larger shareholder returns.
Plus, it’s not as though you’re not benefiting from the price of gold. When gold prices move up, gold miners’ profits don’t just rise; they often multiply. This creates what’s called operational leverage. Historically, when gold rises 10%, well-managed gold miners can rise 20% to 30% or more!
In fact, top Canadian gold companies have transformed since the boom-and-bust era of the 2010s. Most now have low debt, strong free cash flow, and disciplined cost controls. Meanwhile, physical gold never expands its production. Mining companies can. Gold stocks reinvest profits into new projects, exploration, or acquisitions, creating long-term growth beyond gold’s price.
Two to consider
When investors want exposure to gold, Barrick Gold (TSX: ABX) and Wheaton Precious Metals (TSX: WPM) are two of the most powerful names on the TSX, representing two completely different ways to profit from the same metal. Rather than simply owning gold and hoping its price rises, both companies earn from gold. They turn a passive asset into a productive, cash-generating business.
ABX is one of the world’s largest gold and copper producers, with operations spanning 18 mines. Its strategy focuses on high-quality, long-life assets in stable jurisdictions and disciplined cost control. After a sluggish few years, Barrick stock has been staging a recovery in 2025 as gold prices remain elevated. During the second quarter, revenue surged 8% year over year, with net income almost double!
Meanwhile, WPM takes a different approach as a streaming and royalty company. Instead of operating mines, Wheaton provides upfront financing to miners in exchange for the right to buy a portion of their future production at a fixed, deeply discounted price. This model gives Wheaton exposure to gold and silver prices without bearing mining costs or risks. Clearly, it’s working, with revenue up 12% year over year, and cash flow up 18%!
Bottom line
While holding a few coins might satisfy your inner collector, gold stocks are the smarter investment. They let you benefit from the same timeless metal. And right now, ABX and WPM could be two of the best gold stocks to buy on the TSX today.
