This year, stocks have surged by 55%, with almost 25% of that growth happening since late August, outstripping both U.S. and global markets and catching plenty of attention. This surge seems to be influenced by a cocktail of worries—trade disputes, persistent inflation concerns, shifts in geopolitics, and, naturally, gold’s own shiny appeal.
However, after reaching a peak of $4,359.40 on October 20, gold prices dipped by 4.5% within just a week. If you view gold as a rocket ride, then perhaps that’s a blessing in disguise. But maybe this moment invites us to take a step back and reassess what gold really means.
Let me clarify—this isn’t about making predictions regarding gold’s price trajectory. I’ve learned my lesson on that front decades ago. Yet, I am drawn to forecasting various trends. In my last gold column from December 2023, I highlighted how many common beliefs about gold are merely myths that don’t truly inform its direction.
Many advisors push the idea of gold serving as a hedge against inflation. It’s also often believed to provide a safety net during stock market downturns and economic slumps. However, when looking at long-term trends, gold’s returns are far from impressive. Instead, they often fluctuate wildly based on unpredictable market movements, leading to significant volatility.
Since my last piece, gold’s value has surged. Many suggest that concerns over tariffs and U.S.-China trade relations have prompted a global shift toward safer investments, thus making gold, which doesn’t yield interest, more appealing compared to interest-bearing assets.
These are simply rehashed versions of the long-held but inaccurate belief that gold serves as a safe haven. Most experts argue that tariffs are either inflationary or deflationary, and thus gold is deemed a viable hedge. But really? Let’s unpack this notion.
First off, there’s no substantial evidence that gold acts as a shield against tariffs. The only significant example since the U.S. left the gold standard in the 1970s was during President Trump’s first term, marked by the introduction of several taxes—China, for instance. The outcome? From 2017 to 2020, gold lagged behind the rise in U.S. and global stock values.
Also, it’s crucial to note that gold can’t defend against inflation or stock market fluctuations. In 2022, both narratives were debunked when gold dropped by 20%, landing just 5% below stock prices. Hardly a safe haven, right?
At that time, inflation hit a 40-year high. So, how did gold provide any protection? It didn’t. As gold started to climb again, global stock values also rose. Ideally, a good hedge should perform inversely: increasing when stock prices fall.
Sure, gold may be pricey lately. But looking at the broader picture, since 1974, after the U.S. completely abandoned the gold standard, gold has seen an annual rise of 7.1% through September. That’s only marginally higher than the 30-year U.S. Treasuries, to put it mildly.
Meanwhile, U.S. stocks have an annual increase of 11.5% during that timeframe. Global stocks show a rise of 9.6%. While these differences might seem minor at a glance, over time, they add up significantly. Gold’s overall return since ’74 is about 3,306%, whereas U.S. stocks yield a staggering 28,340%—over eight times more.
Once again, gold’s volatility is a key concern when observing standard deviation. Short-lived booms like what we’ve seen this year often come before unpredictable crashes and long periods of stagnant performance. The most notable stretch lasted 28 years, from when gold peaked in 1980 until it reached that height again in 2008—during constant inflation no less.
This suggests that timing with gold is crucial. Yet, predicting its next move has no solid grounding since the fundamental driving factors are few and far between. Many investors struggle even with timing stocks and bonds, which generally have less volatility and more frequent returns. So why attempt something so inherently tricky that relies heavily on gauging the sentiments of others?
Engaging with gold might feel like a game of musical chairs with your finances. The myths surrounding it are well-entrenched, symbolizing wealth and power for countless cultures. People appear eager for a reason to embrace it in the current market. But just repeating a falsehood doesn’t transform it into fact.
If you’ve benefitted from the 2025 gold surge, that’s definitely worth celebrating. Yet, it might also be time to consider strategies that keep volatility in check and offer better prospects in the long run. Admittedly, the allure of gold could use a bit of a reality check.
