The relationship between microstructure and giant magnetoresistance (GMR) of granular Au80Co20 was investigated. Two different processing routes were explored. With the melt spinning technique the microstructure appeared to be so coarse that it was not expected to exhibit any substantial GMR effect. On the other hand, with the procedure of solid-solution annealing and water quenching afterwards, a suitable nanostructure was prepared that showed a GMR of 29% at 10 K and 50 kOe. Subsequent annealing causes coarsening of Co particles. In additional spinodal decomposition occurred for a certain temperature range and a loss of coherency of the Co particles with respect to the Au was observed with high-resolution transmission energy microscopy. At magnetic fields above ∼20 kOe, all annealed alloys showed a saturating magnetization, whereas the resistance is still steadily decreasing, challenging the presumed mathematical relationship between GMR and overall magnetization.