I have never been one of the doom-and-gloom guys who thinks the financial systems are about the abruptly break down and that we will all go back to the stone age. Never thought the Y2K bug will wipe off all the online financial systems to the ground. Never in my life I thought gold is something I would consider in my portfolio – but times they are a changing, as Bob Dylan once sang.
Gold is a token. All precious metals are. While precious metals do have industrial uses, their value is not correlated to demand in the same fashion industrial metals would. Gold’s value is derived from speculation – how much central banks and wealth funds want to hold of it.
The reason investors, governments and even regular people buy gold, and more so in the past 2 or 3 years, is because it feels “safe”. A physical asset that serves as the the ultimate insurance policy. When currencies look shaky, geopolitics are unstable, interest rates swing or don’t meet expectations (which is the situation over the last 1.5 years where inflation was predicted to drop), or when debt markets start to strain a-la 2008, people instinctively look for something that appears to them as timeless. It’s gold, and to a less extent, silver.
Precious metals don’t move with the same logic as copper or iron. Their price doesn’t really follow factories or production ramping up or slowing down. They are just a token of confidence, and when things feel unstable, their value jumps.
Why 2025 feels shaky and why the dollar is weaker
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Job growth has slowed down and then some. Only about twenty-two thousand new jobs were added in August and unemployment has crept up to the highest level in years. That alone makes people doubt the strength of the recovery.
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Investors now expect the Federal Reserve to cut rates more than once before the end of the year. Every time that expectation grows, the dollar loses some of its shine.
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There is open talk about political pressure on the Federal Reserve. When people believe central banks are no longer independent, they lose confidence.
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The dollar has already fallen by roughly ten percent this year, one of its sharpest drops in half a century. That decline has made global investors nervous.
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American economic policy feels unpredictable. New tariffs, sudden shifts in spending and rising debt, all communicated via social media, does not add confidence.
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Wars are spreading. The conflict between Israel and Iran rattled energy markets and sent oil prices jumping. The war in Ukraine continues to grind on. Rising tensions regarding Taiwan invasion keep piling up.
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More countries are trying to move away from the dollar. They are setting up alternative payment systems, trading in local currencies, and building reserves in gold and other assets.
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Foreign capital is quietly pulling back. Global funds that once went automatically into American stocks and bonds are now spreading into Europe, Asia and emerging markets. The flow is slow but steady, and it chips away at the dollar’s dominance.
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Long-term valuation models suggest the dollar is overvalued compared to its real purchasing power. If that is correct, the correction we are seeing now may only be the beginning of a longer slide.
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Alternatives are performing better. Especially – precious metals.
How much should I put into gold
This chart shows three common approaches to including gold in a portfolio. Conservative investors who want maximum protection often place ten to fifteen percent of their money in gold. Balanced investors typically set aside five to ten percent, using gold as a cushion but keeping most funds in stocks, bonds and other assets. Aggressive investors may only hold a token amount of gold, between zero and five percent, since they focus more on growth.