Is Now The Time To Buy Gold?

After languishing for well over a decade, Gold has suddenly garnered a lot of media attention after having risen more than 60% over the past year. Even investors who are not performance chasers are asking if this might be a good time to buy some.

The bullish case is compelling. As an asset class, gold has been historically uncorrelated with both equity and fixed income investments. A basic tenet of modern portfolio theory (MPT) is that by adding uncorrelated assets to a portfolio you reduce volatility. That provides two benefits: less drag on returns from bigger price swings and less emotional inclination to buy or sell (out of greed or fear) at the wrong times.

Hard assets such as gold and real estate have historically been popular as safe-haven investments during times of economic or political uncertainty. Which is why many alarmists have been touting gold recently as the best place to invest your cash. A number of global central banks such as China, Turkey, and Poland have also been reducing their U.S. dollar dependency in favor of gold due to wariness over President Trump’s vacillating tariff policy. This so-called de-dollarization – although not necessarily a trend – has the potential to reduce the demand for dollars as well as to increase the demand for gold. Both would be positive for gold prices.

On the negative side, gold is neither an income-producing asset nor a purely industrial commodity. According to USGS 2024 data only a little over 50% of global gold is used for industrial purposes (mostly jewelry). The remainder is maintained as a store of value by governments and financial institutions. As such, its only growth comes from capital gains. And its price has been volatile. Equities, on the other hand, represent shares of income-producing corporations, generating both capital gains and income for investors. They play a much stronger role in long-term wealth accumulation than gold does, frequently with lower volatility.

Gold has shone brightest (pun intended) as a hedge against many equity bear markets. Its performance during more stable and growth-oriented economic periods has been generally inferior to that of stocks. Since the latter periods of time have occurred more frequently and with greater duration, stock returns have beaten gold hands down. For example, over the fifty years from 1976 through the end of 2025, the price of gold increased 3,372% while the S&P 500 returned 6,298%.

Gold also faces new competition from cryptocurrencies as a store of value. For the present, Bitcoin’s volatility, valuation difficulties, and lack of stronger regulatory oversight seem to have had little impact on gold prices. But in the near future, especially with Trump promoting greater cryptocurrency ownership together with a new meme coin in his own name ($TRUMP), who knows? 

Recognize also that in the wake of the recent runup in price, gold is currently quite expensive relative to its historical average. Expected future returns are likely to be lower moving forward.

What should a prudent investor do? As a diversifier, gold certainly adds value to an investment portfolio. And these days you don’t even have to worry about buying gold bars and storing them somewhere. There are at least half a dozen ETFs in which you can invest that buy and store gold for you in multiple banks worldwide in order to reduce the risk of theft. But I would not recommend more than a small allocation, given its volatility and its poorer long-term performance. 

(Sources: Fortune, Reuters, NMA, Nasdaq)