original source: http://www.merriman.com/advanced-portfolio-management/all-that-glitters-is-not-gold/

Merriman does not include a specific allocation to gold in our standard portfolios. This article, by Bryan Harris of Dimensional Fund Advisors, discusses why gold has not been an ideal long-term investment. It includes the following key concepts:

Gold has done well since the year 2000 and in the 1970s, and can potentially be a safe haven during times of political and economic stress. However, for the entire period of 1971 – 2011 gold performed worse than the S&P 500, U.S. small-cap stocks and non-U.S. stocks on an inflation-adjusted basis.

From 1980 – 1999, gold experienced a negative return after inflation of -6.5%, vs. strong positive returns for stocks.

While gold has held its value against long-term inflation, there have been extensive periods when gold did worse than inflation. Gold is also much more volatile than inflation, and can add substantial volatility to a portfolio.

Unlike stocks, which are productive assets which generate growing levels of income and dividends over time, gold has no cash flow and costs money to own.

I actually don’t endorse the article. Upon reading it, I could not help but feel its manipulative.

This article claims S&P annualized return from 2000 through 2011 to be -1.88%. Does not seem to match what I see on http://quicktake.morningstar.com/index/IndexCharts.aspx?Symbol=SPX. However this blog says: The 10-year annualized return through 2010 was a paltry 1.41%
Also check S&P 500 annualized return calculator at http://dqydj.net/sp-500-return-calculator/