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WHAT WAS THE road to outstanding investment performance in 2025? For the first time in a long time, it wasn’t Apple, Amazon or Nvidia. It was gold. Delivering its best performance in 45 years, gold rose nearly 65%. Despite these impressive gains, however, I still don’t see gold as a great investment.
Why not?
The most fundamental problem, in my view, is that gold lacks intrinsic value. Unlike traditional investments such as stocks, bonds and real estate, which produce dividends, interest and rent, respectively, gold generates no income. As a result, there is no tangible basis for determining an appropriate price—or even an appropriate price range—for gold.
Warren Buffett explained it best, when he posed this thought experiment: Suppose, he said, that you owned all the gold in the world and fashioned it into one giant cube. What would it do for you? Buffett joked that you could, “climb up on top of it…polish it…stare at it.” But that’s it. Because unlike productive assets, gold doesn’t produce anything.
That’s a problem because it makes the price of gold volatile and unpredictable. “All you are doing when you buy [gold] is that you’re hoping that somebody else a year from now, or five years from now, will pay you more to own something that, again, can’t do anything,” Buffett added.
Another key problem with gold: It’s perceived as a way to hedge against inflation, but that’s more of a perception than a reality. Gold’s reputation as an inflation hedge stems mainly from its performance during the 1970s, when inflation in the U.S. ran as high as 14%. During that decade, gold rose dramatically, from $35 an ounce in 1970 to $750 in 1980. That led many investors to conclude that gold and inflation must be linked.
But in subsequent years, gold languished. Throughout the 1980s and 1990s, gold mostly traded between $300 and $400. It wasn’t until 2007 that gold finally got back above its 1980 peak.
Gold has also disappointed investors in more recent years. In 2022, when inflation rose as high as 9%, gold didn’t do terribly well. It did rise early in the year, but when inflation later eased, gold fell. By the end of 2022, gold prices had fallen all the way back to where they’d started. In a year which saw the worst inflation in a generation, gold delivered essentially no net gains.
These are the reasons I’ve never seen gold as being a useful investment, but after last year’s rally, the risk is now even higher. And especially because gold lacks intrinsic value, there is very little supporting it, other than the confluence of five factors that happened to come together in 2025 but aren’t guaranteed to repeat.
What were those factors? First, the Federal Reserve lowered interest rates multiple times in 2025. Interest rates affect gold prices indirectly because higher rates make it relatively more attractive to own bonds or other income-generating assets. When rates fall, the opportunity cost of owning gold falls, making it relatively more attractive.
The second factor that lifted gold in 2025 was a sense of uncertainty over global events. This included Russia’s ongoing war with Ukraine as well as rising tension between the U.S. and other dictators around the world, from China to Iran to Venezuela. Because of its very long track record, gold is seen as a “safe haven” during times of uncertainty like this. It is arguably the oldest store of value still in use, and because it is easy to transport and can be converted into currency anywhere, it tends to gain in value when other assets seem more at risk.
What else drove gold in 2025? Central banks around the world have been increasing their gold reserves in recent years. When Russia first invaded Ukraine, the U.S. froze many of Russia’s financial assets. All things being equal, that made gold a more attractive holding to countries worried that they too might end up on the wrong side of future sanctions. That incremental demand has helped further boost prices.
Gold has also benefitted from what’s been called the debasement trade. This term originated in ancient times when governments would dilute their coins as a way to easily increase spending. In the short term, this strategy was effective, allowing a government to expand its budget without raising taxes. In the long term, though, it typically backfired, resulting in higher inflation. Investors are worried that the U.S. is experiencing a modern-day version of this. Even with Covid now several years in the past, federal government spending continues to outstrip revenue by nearly $2 trillion a year. The concern is that this will impact the value of U.S. Treasury bonds, and that’s led some number of investors to shift to gold as an alternative.
A final reason that gold has been rising is because it’s been rising. There is a momentum factor, in other words. As investors watched gold climb the leaderboard last year, those gains attracted other investors, which created further upward pressure on prices.
Last year, in other words, was the perfect environment for gold. The challenge, of course, is that past performance doesn’t guarantee future results. If some number of these dynamics reverse in 2026, gold’s rally could stall out.
Which way will things go? No one knows, but the good news for investors is that you shouldn’t feel compelled to invest in gold. Yes, it’s been going up, but there are many other ways to build a reasonable portfolio. And jumping into an asset after it has already logged significant gains carries significant risk.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam’s Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
I started investing in a gold miner in 2017 at around $1@shr. I liked the management that I met. When it dipped, I bought more. My avg cost by the close of 2025 was close to $0.50. Today, that miner is $18. Had I bought the metal, my investment would have quadrupled. Food for thought
This is the same argument about gold people have been making for decades, but they all miss the point.
Gold is one of the easiest ways individuals can protect their portfolios against dollar debasement. Sanctions and mostly Trumps chaotic, unreliable foreign policies and the domestic chaos he has unleashed have made the US Treasury Bond a much more unreliable investment.
Friends of mine in the foreign service say no other country believes the US anymore, much less assumes we will not invade or sanction them. It will take decades to restore this trust.
International investors see the budget deficit, just this week massively enlarged by Trump’s demand the defense budget be doubled, and know many, many more Treasuries will be printed. They see the chaos in American streets, the lies pouring out of Trump, Noem and Vance and realize they can no longer count on America’s word to pay them back, or believe the rule of law still prevails in America.
You can take your gold and sell it in any country worldwide, knowingwhat you will get. Not true of T Bonds.
To some extent the same arguments apply to other commodities. Everyone should allocate a % to materials that are portable around the world.
Before anyone complains that this message was too political, I want to point out that regardless of party in charge, the US legal system was stable from the Great Depression until early 2025 because people in government followed laws and accepted norms. We are now in uncharted territory of rule by a few. The people in charge have toppled rhe system.
Gold may lack intrinsic value, but that doesn’t mean investors should limit themselves to 100% index funds or overly simple strategies.
Simple investing works well for most people—but not for everyone. My own risk/reward approach has been shaped in part by Warren Buffett:
I’ve added a fourth rule: momentum.
Buffett himself once said he wouldn’t invest in high-tech companies—yet later bought Apple, which grew to more than 45% of Berkshire Hathaway’s portfolio.
Similarly, Jean-Marie Eveillard, the legendary manager of SGIIX, allocated roughly 10% to gold-related positions for decades.
Markets present multiple opportunities each year across specific categories and sectors. A practical approach can be holding 70–80% in core positions and 20–30% in “explore” or opportunistic funds.
And while gold may not have much practical use, silver certainly does—with extensive industrial applications in electronics, solar panels, water purification, mirrors, batteries, and more.
In 2025, GLD gained over 63%, while SLV surged more than 133%.
Which raises a fair question: why did so many investors stick with SPY or VOO instead of QQQ, when the technology revolution has clearly dominated global markets for decades?
If you want to follow Bogle and buy and hold just 3 funds, why bother discussing investment at all?
SLV continues to shine.
It is interesting you say it has no intrinsic value. I have heard the opposite. And forgive me for not stating the reasons articulately, but basically you can make stuff out of gold, and it’s historically been used as a currency, so there is intrinsic value in that regard. Still, I agree with the sentiment. I do not plan to invest in gold because it does not produce income.
I completely agree with you. Gold’s history gives it some semblance of a supply and demand mechanism ( in contrast to crypto, which is still searching for broad public acceptance and will not be anywhere on my desirability list any time soon). The buy-sell framework for gold is not very comforting when you look behind the curtain, and transaction costs are huge. I want something with a promise behind it that can be measured and met – shares that pay me a dividend, shares from someone who will try to run a business at a profit and increase its value for me, or debt where someone pays me for the privilege of my allowing them to use my money for a while.
Thank you for some comedy in HumbleDollar: “in contrast to crypto, which is still searching for public acceptance.”
Part of the public (and certain gov’t officials and grifters, who may overlap) have so embraced this that “acceptance” feels like such a weak word.
And this discussion is about fundamentals. What’s fundamental about crypto? Alrhough it would certainly be easier to carry a USB key with any amount of crypto across a border than gold bars, but also a lot easier to lose.
The best argument for gold is as insurance against currency debasement, but even in that case, you’d likely be better of with a stash of booze, guns, food stores, and chickens…. If you have to claim against this insurance policy, you will likely have bigger, basic survival, problems to deal with. The guy with the guns is going to take your gold and whatever else you have….
Invest in all the precious metals… gold, silver and lead… LOL. Seriously, the people who did well in Kosovo during the blockade were sex workers, drug dealers, arms dealers and moonshiners. I don’t think I would make a good sex worker, sooooo…..
Fresh water.
IAU, GLD, or similar justifiably have a place in any portfolio. The entire universe of financial instruments is reliant on a buyer and seller, nothing more fundamental than that. It’s likely thay buyers will pay more for gold going forward, so it’s reasonable to be in a position of seller.
Adam, very well addressed. I am with you and Buffett, and have NO plans to add Gold or any other commodity to my portfolio. Thanks for you well written articles, and keep them coming.
Gold does have some industrial uses including as a heat sink. But with the price of gold so high, people have found substitutes. I will not be holding any gold in my portfolio. Thanks for this nice article.
I agree with everything you say Mr. Grossman, with that said, I own PMs and will always have them for one simple reason, they are insurance, not an investment in my eyes. I hate that they are a pain to liquidate, you have to store them, AND no cash flow!! I feel the pain of no cashflow (CF is the gauge I care about these days) with my coming reliance on said cashflow (just retired). True, the scenarios that PMs as insurance are quite dire at minimum and I do not relish the idea of being right here but I definitely sleep better with them in my portfolio. I am also VERY concerned with the valuations of the equity markets. The CAPE ratio is the simplest measure to mention here. Plus the fact that the markets have had no respect for their own mean value for some time. The idea that the markets never return and go below the mean (and the mean comes up towards current valuations) is absolutely possible its just that the chances of that are very low. I have capped my equity exposure to 50% and have 30% in cash equivalents ready for the pullback that will someday come. The rest is in PMs although I haven’t invested in them in a dozen years, they have tracked up holding their allocation percentage on their own without adding. This past year they blew that out. I don’t expect many to agree with my setup and that is ok, Those that don’t live in cities and have firearms/extensive set of tools that they know how to use will probably be more inclined to agree with my perspective. In the end, I really value your insights and use them to shape how I do things for sure. Thanks for taking the time to share.
What’s a PM?
Precious Metal
I understand the “insurance” argument for PMs, but I’ve always wondered about the practical side. In a true stock-market and dollar crash, what’s the realistic endgame for PMs? Trading them for worthless dollars seems pointless. How would you actually use them?
TONS of problems with them for sure. One example: They were made illegal to own back in 1931 and though I think the possibility of that happening again are very minimal, its a threat none the less. My use case is passing them along as part of my estate through trusts and never touching them…..insurance for me and then for my heirs. Not convenient, no cash flow, you pay a fee entering and exiting (currently anyway). Its so much less convenient than mouse clicks in a brokerage account BUT I am not a fan of everything I have in paper financial instruments and holding cash is a losing proposition. I just want it to be there in case of emergencies (and by emergency I mean dollars aren’t accepted any longer….a stretch for sure but go back and look at what happened to EU families after WW1/2…..yes it can happen) and to gradually rise in pace with real inflation. Not for everyone. I see it as ACTUAL diversification. There is no perfectly secure financial plan that will guarantee your solvency. This is just one part I use to add to my solvency options. Not for everyone.
The story of gold and its possible role in portfolios is more complicated than this. Here’s the best article I’ve read on the topic:
https://portfoliocharts.com/2020/08/21/metal-money-and-the-measurable-value-of-gold/
I think best to think of gold as an insurance asset that, in modest amounts, can reduce sequence of returns risk and hedge against market meltdowns and ongoing currency debasement.
That said, I much prefer globally diversified stocks combined with high quality bonds; the only gold I own is a wedding ring
I read the article, but is there an error in the author’s chart? ABX on the NYSE is the symbol for Abacus Global Mngmt. ABX.TO is the symbol for Barrick Gold, which has a very different performance chart. I also think what maybe missing is that Barrick is not necessarily a speculator in gold, but a producer that would readily adjust its mining and refining operations based on the price of gold. It would constantly adjust what it pays for raw material and what it sell its finished product for it order to maximize its net return – independent of the spot price of gold.
I doubt very much that Mr. Buffet has changed his mind on gold, but more likely sees a market play in Barrick as gold prices help drive its stock price, while still earning a current dividend return. The greater question may be: will Berkshire continue to hold on to Barrack when the inevitable turn in gold prices arrives?
Gold has been the traditional standard of monetary exchange and value for thousands of years. It doesn’t rust or corrode and is very in limited supply. In the US an ounce of gold has traditionally been equal to the value of a good men’s suit. The price of gold can go down but that then means that the value of the currency has gone up. You can buy the same amount of gold for less money.
The price of gold shows how much our money has been debased over the years. As Adam stated the price of gold was $35 in 1970 but now is over $4000 today. Not because amount of gold available has shrunk but because the amount of money printed has increased. The inflation of our money supply is the real reason the price of gold has risen. Our wonderful Federal Reserve has an inflation “goal” of 2% a year.
I think when most people buy gold they aren’t “investing.” Instead they’re buying insurance against some future danger they anticipate as possible, Like buying insurance they’d rather not collect on the premiums.
That is me. I own a small amount of (actual) gold to get me through some VERY tough times that we cannot foresee. And, it is better to not collect on it and to pass it on to my kids.
I consider the entire financial system gambling. Investing is a different mindset.
For me, the most significant aspect of gold’s ascent is the fact that it has eclipsed U. S. Treasury securities as the largest reserve holding by the world’s central banks. Basically, what other central banks are saying is that we’d rather hold gold, a neutral reserve asset that can’t be debased or seized by the U. S., than those greenbacks–which says a great deal. This year, the U. S. must roll over over $12 trillion in debt, which will most likely be done if the form of short term treasuries. Over time, if central banks keep reducing their Treasury holdings, who is going to buy all our debt? This trend doesn’t bode well for the U. S. and I don’t see it getting better any time soon.
This is all that needs to be said right here. Patrick is right on point…
Great breakdown! The challenge I see is that your last sentence can apply to nearly every single asset class today.
I agree, gold isn’t special, but diversification has benefits. My personal portfolio experienced a total 12-month return of 25.29%. It’s 53% stocks, 47% cash and bonds. Bond funds/ETFs are 3.33% of my portfolio. I avoided the bond fund meltdown a few years. ago.
Foreign stocks are 14% of the total. While a significant percentage is individual stocks, I don’t own the Magnificent Seven outright and “Large Growth” is 14% of my portfolio. For comparison Vanguard’s Total Stock Market VSMPX is 17% large growth. While the S&P 500 is 9% Small companies, my portfolio has 15%.
My experience since the 1990s is that gold can go nowhere for long periods. At one time I owned ticker GLD.
However, I do own a mining ETF, and it includes precious metals. One attraction is that it pays a dividend. The total, 10- return has been 21.54%. The 12-month gain has been 148%. It is 2.63% of my portfolio.
I own two TIPS funds. These are 2.63% of my portfolio. One provided a total, 10-year return of 2.99%. The other 3.12%. Slightly better than my gold mining stock.
Again, diversification has benefits. “The whole is the sum of its parts.”
Thanks for providing your perspective and actual numbers regarding diversification. Just fyi, I think the S&P 500 is 1% small cap and the VSMPX (similarly, VTI ETF) is 9% small cap.