As gold prices ended 2025 with serial record highs, bullion bulls foresee even bigger 2026 gains. Many expect gold to again outperform global stocks and almost everything. Maybe. Maybe not.
Regardless, investors who benefitted from the recent boom should now think long, hard and soberly about its role in any portfolio. Gold investing success depends almost entirely on luck, not skill. Let me show you.
I am not forecasting gold’s price. I learnt more than 50 years ago not to do that, up or down – and I make abundant public forecasts. Why? Because no one can forecast gold with any consistency. Therein lies my point.
When I last wrote about gold for The National, back in April 2023, I showed most arguments for owning it are myths – useless in forecasting. I noted at the time that gold is historically far more volatile than stocks and bonds, with little industrial use and lower longer-term gains than stocks. Returns cluster in big booms, big busts and long fallow periods, requiring impeccable market timing … or, more likely, luck.
Since that column, gold meandered through 2023, lagging behind the MSCI World Index. Then came big 2024 gold gains and the 2025 boom – putting gold at record highs. Most experts say tariffs and geopolitical tensions spurred a global flight to “safety” – and that, supposedly, more US Federal Reserve rate cuts will push its rise higher, as lower rates allegedly render no-yield gold more competitive. Maybe.
But these are just new twists on old, misguided gold myths. Consider that many pundits now presume tariffs are recessionary or inflationary (despite inflation being caused solely by central banks’ excess money creation). This allegedly spurs hedge demand. Yet, gold does not hedge anything reliably.
There is no historical evidence that gold is a tariff shield. The only major precedent since the gold standard ended in the 1970s was during US President Donald Trump’s first term, when he imposed tariffs on China and threatened other nations. Gold slightly lagged behind the MSCI World then, while flagship indexes for the two countries involved – the S&P 500 and MSCI China – both beat returns on gold.
Yes, gold soared amid the 2025 tariffs. But tariffs themselves did not drive that outperformance. Nor did fundamentals – gold has none. It lacks profits, dividends and yield. Beyond jewellery, gold has only meagre industrial use, which comprises less than 8 per cent of global gold consumption.
Rather, gold swings on pure sentiment. That is why gold returns cluster in irregular and unpredictable swings – a trend recent gold returns may echo. Obtaining superior returns with gold requires investors to participate in those huge booms and avoid the busts and fallow periods between them. I cannot time markets that reliably. Nor am I aware of anyone who can.
Consider that gold’s returns were positive in 59 per cent of rolling 12-month periods since 1974, versus the S&P 500 and world stocks’ 81 per cent and 78 per cent, respectively. Few can time entry and exit points in stocks well. Hence, it is a bad idea to gamble on gold, which is harder to time and hinges almost solely on the feelings of others. It is quite like playing musical chairs.
Moreover, all capital markets – including commodity markets such as gold – pre-price all widely known fears like tariffs and geopolitical tensions. Yes, tariff uncertainty persists, with the free trade US-Mexico-Canada Agreement (USMCA) up for review and the US Supreme Court considering the legality of American blanket tariffs. But all of this and more is discussed and watched endlessly. Hence, it is already largely baked into all capital markets prices.
On inflation and bear markets, 2022 shatters any idea gold hedges either. Inflation galloped in 2022, hitting 9.1 per cent year on year in America, alongside similar global accelerations. However, gold ticked down. It fell 20.1 per cent from its March high through its November low, mostly paralleling the slide of world stocks. That is not what a hedge does. Gold rose with global stocks in 2025 as global inflation slowed.
Many gold bulls claim lower interest rates will make gold more competitive. That is further illogical thinking. The high inflation many believe is good for gold usually induces rising long-term rates. So, high and low rates are both supposedly golden for gold? That is ridiculous. It cannot work both ways.
Those who profited from the 2025 gold boom should not congratulate themselves. Instead, now is a good time to think through a more predictable long-term strategy, with a greater likelihood of long-term higher returns and lower volatility. My forthcoming 2026 forecast can fit into that strategy.
