Gold has always had a unique place in the investment world. It’s tangible, timeless, and symbolic of wealth and security. In uncertain times, it often performs well. In 2025, when markets are volatile, central banks are recalibrating, and inflation and interest rates are moving in unpredictable ways, gold has been a great performer. The question for me though is whether gold still has a place in a modern portfolio.
The case for gold begins with its role as a store of value. When inflation erodes the purchasing power of paper currencies, gold tends to hold its worth. It has a long track record of protecting investors during periods of high inflation or when confidence in fiat money weakens. Beyond that, gold provides what investors want when uncertainty rises; diversification. It doesn’t move in lockstep with equities or bonds, and that lack of correlation can smooth the bumps in a portfolio during turbulent times.
Another key argument in favour of gold today is the strong demand from central banks and institutional investors. Around the world, central banks are buying record amounts of gold to diversify away from the US dollar and strengthen their reserves. That steady demand provides a floor under prices and signals a deeper structural confidence in gold as a reserve asset. There’s also the appeal of owning something real. Physical gold doesn’t rely on a promise to pay or a balance sheet behind it. It’s not someone else’s liability. For some investors, the ability to hold value in their hands is its own reassurance, especially when trust in financial systems is being tested.
The case against gold, however, is just as strong. Gold doesn’t pay interest, rent or dividends. It doesn’t compound. When interest rates are higher the opportunity cost of holding a non-yielding asset becomes more obvious. Investors could instead be earning 4 or 5 percent in bonds or term deposits while gold simply earns no income. There are also practical downsides. Physical gold needs to be stored safely, which means costs for vaulting, insurance, and security. While gold is often seen as stable, its price can be highly volatile. It can fall sharply after strong runs just as quickly as it climbs.
Then there’s the macro dynamic. When real interest rates rise, gold tends to struggle. Rising real yields increase the appeal of income-producing assets and reduce the relative attraction of gold. While real rates will likely come down in the short term, if central banks are forced to keep rates higher for longer, that could completely change the thesis for gold.
Another consideration is speculative behaviour. When prices surge, investors rush in, often late, which can inflate bubbles that eventually burst. The same fear and greed cycles that move stocks also exist in gold markets. There are many assets and areas that have been incredibly popular and delivered great returns but don’t meet the requirements to be included in our portfolios. We don't invest in crypto currencies or bitcoin, I consider Chinese stocks uninvestible, art and collectibles, most private credit and private equity are too high risk in my opinion. Gold’s appeal lies more in emotion than economics. It reflects fear, not fundamentals.
Gold may well continue to rise, just as other speculative assets might, but that doesn't make it a sound investment. Price movements alone don’t justify inclusion in a disciplined portfolio. Part of the core investment criteria for our portfolios is that the assets must create value and pay or earn income. Businesses, infrastructure and real assets that generate income and growth. It's not about chasing trends or what feels safe in the moment. Gold offers no earnings, no compounding and no productivity. It may have a place as a diversifier for some, but for me, investing with conviction means having clarity on what you own and staying disciplined throughout.
General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.