This article first appeared on GuruFocus.

Gold's extraordinary 2024-to-2026 rally has crushed inflation, but Deutsche Bank's six-decade review delivers a warning for SPDR Gold Shares (GLD) investors: the metal can preserve purchasing power over long periods, yet its performance depends heavily on the starting valuation, monetary regime and market cycle.

Warning! GuruFocus has detected 8 Warning Signs with F.

Is GLD fairly valued? Test your thesis with our free DCF calculator.

From 1957 through 2023, gold generated an annualized inflation-adjusted return of roughly 2.5%, while U.S. consumer-price inflation averaged 3.7%. Those figures measure different thingsreal returns already account for inflationbut the period-by-period breakdown still challenges the idea that gold reliably rises alongside consumer prices.

Gold posted an annualized real loss of roughly 2% from 1957 to 1970 as inflation averaged nearly 3%. That weakness partly reflects the Bretton Woods system, under which the U.S. maintained a fixed official gold price until dollar convertibility ended in 1971.

The metal then delivered real returns near 8% between 1971 and 1985, outperforming inflation of roughly 7%. But from 1986 through 2000, gold lost around 4% annually after inflation even as CPI remained near 3%. Another powerful cycle followed from 2000 through 2023, when real returns approached 6% against approximately 3% inflation.

The 2024-to-2026 period has been far more dramatic, producing annualized real returns near 30%. Deutsche Bank recently maintained a $4,600 year-end gold target, although gold has already displayed unusually volatile, explosive price behavior.

Investors should treat gold as a portfolio diversifier rather than a precise CPI hedge. The more important near-term drivers are real interest rates, the dollar, geopolitical risk, central-bank demand and ETF flows. The World Gold Council says gold remains highly sensitive to changing macro expectations and investor sentiment, while 89% of surveyed reserve managers expect global central-bank gold holdings to increase over the next year.

Falling real yields, dollar weakness and renewed ETF inflows could extend the rally. Higher yields, easing geopolitical stress or profit-taking after the historic surge would expose investors who bought gold assuming inflation alone guarantees further gains.