Gold's Record Highs: Is It Riskier Than Stocks? | Reuters

Gold's Record Highs and Volatility

• 🥇 Gold reached a new all-time high of $4,689 an ounce following threats of new tariffs on European countries over Greenland.
• 📈 The precious metal saw a significant gain of 64% in 2025, leading investors to question the sustainability of its rally.
• ⚠️ Joy Yang from MarketVector Indexes notes that gold is becoming very risky due to its price volatility, potentially exceeding the risk in stocks.

Valuing Gold vs. Stocks

• ❓ Unlike stocks, gold cannot be valued through cash flow or earnings, making its fair value determination difficult.
• 📊 Its price is primarily driven by supply and demand dynamics, not historical financial performance.
• 📉 Momentum rallies, like the one in gold, can attract speculative buyers who may exit quickly, leading to expected pullbacks.

Structural Drivers for Gold Demand

• 🏦 A key structural driver for gold demand is central bank buying, which has been consistent since the Ukraine war.
• 🌍 Central banks are increasingly looking to delink from the US dollar, reducing dollar dependency and asset risks.
• 📈 While ETF and retail buyers contribute to short-term flows, central bank activity represents a more sustainable demand.

Gold as a Hedge and Investment

• 🇺🇸 International investors are showing growing concerns about US assets and dollar dependency, making gold an attractive hedge.
• 📊 Gold is considered a safe haven for hedging uncertain outcomes and offers opportunities in emerging and developed markets.
• ⚖️ Many recommend allocating up to 10% to gold, while current allocations are closer to 1-2%, suggesting it remains broadly underallocated.
• 🛡️ Holding gold is seen as a prudent insurance policy against market volatility, even without clear growth opportunities.

Gold Miners' Performance

• ⛏️ Gold miners have experienced explosive growth, with gains significantly outpacing gold prices (e.g., 170% vs. 60% in 2025).
• 📈 Miners have operating leverage to gold prices, showing higher year-to-date gains than gold itself.
• ⚠️ However, the leverage works both ways; gold miners can also fall twice as much as gold during downturns.