Gold is breaking records and challenging conventional investment wisdom, as it climbs above $4,000 an ounce for the first time and posts a 53% gain in 2025, on track for its strongest year since 1979. This surge outpaces Bitcoin’s 30% rise and the 15% increase in the S&P 500, including its tech-heavy components, prompting investors to rethink how one of the world’s oldest safe-haven assets behaves in today’s markets.
Traditionally, gold thrives when fear dominates markets—rising amid inflation worries, economic slowdowns, or turmoil in equities. In contrast, during periods of strong investor confidence, it often lags riskier, high-growth assets like stocks or cryptocurrencies, which don’t require storage or insurance. Historical examples include the 1980 gold spike amid 13% US inflation and the 2008 financial crisis, when stocks plunged while gold soared.
However, today’s market defies that pattern: gold is rallying in tandem with stocks and Bitcoin, as investors anticipate US interest rate cuts and growing concerns about the dollar’s role as the global reserve currency.
“When there’s a paradigm shift in the economic system, history shows people move to gold,” said Arun Sai, senior multi-asset strategist at Pictet. “Think of it as the ultimate hedge against currency debasement.”
Global political and economic uncertainties are adding fuel to the rally. From France’s budget woes and central bank independence concerns to the ongoing war in Ukraine and tentative progress in Gaza, investors face a complex landscape. Meanwhile, AI-driven gains on Wall Street, along with President Donald Trump’s stimulus and tariff policies, are shaking confidence in Treasuries and weakening the dollar, which has fallen 10% against major currencies this year.
JPMorgan CEO Jamie Dimon has warned of a potential US stock correction in the next six months to two years, while rising inflation fears, partly due to tariffs, further boost gold’s allure.
“We may be at an inflection point for inflation,” said Michael Metcalfe, head of macro strategy at State Street. “Concerns about Fed independence and rising prices often go hand-in-hand for gold.”
G7 inflation climbed to 2.4% in September from 1.7% a year earlier, even as central banks largely keep rates steady or ease policy. Since August alone, gold has surged around 20%, supported by resilient economic indicators and expectations of US rate cuts extending into 2026.
Investors are also guided by the concept of the efficient frontier—allocating gold alongside equities can optimize returns relative to risk. Rhona O’Connell of StoneX explains that rising equities can justify increasing gold holdings as a hedge, generating extra return while managing portfolio risk.
Retail interest is another driver. According to Gerry Fowler at UBS, every inflow into gold ETFs triggers physical purchases, reflecting broader “retail enthusiasm” that mirrors market exuberance elsewhere, including in AI stocks.
The AI boom itself adds a new layer: gold now serves as a hedge against a potential tech bubble collapse. Trevor Greetham of Royal London Asset Management notes that, in the event of an AI-driven downturn, gold could climb further as investors seek security.
Central banks are increasingly stocking gold, now holding around 25% of their reserves in bullion, signaling a shift away from the dollar. Mark Ellis, CIO of Nutshell Asset Management, attributes this trend to Trump-era tariffs driving exporters to diversify away from dollar reliance, succinctly summarizing:
“My main take on the latest gold boom? It’s Donald Trump.”
In 2025, gold is no longer simply a safe haven—it’s a strategic asset reshaping how investors approach risk, inflation, and the interconnected dynamics of modern markets.
Disclaimer: This information has been collected through secondary research and TJM Media Pvt Ltd. is not responsible for any errors in the same.
