As gold has recently just reached new all-time highs, it’s no surprise we’ve received quite a few questions about it. Interestingly, there is a much more prevalent fear around its record valuation than we witnessed at the peak of the AI hype in 2023/24. That is best represented by Nvidia, whose earnings estimates faltered before the share price rocketed but eventually followed them.
Back to gold, and three of the best reasons for holding gold remain rooted in its historical and economic significance.
Hedge Against Inflation and Currency Devaluation
Gold is widely regarded as a store of value, particularly during periods of high inflation or when fiat currencies lose purchasing power. Central banks across the globe have increased their gold reserves to safeguard against economic uncertainty and potential currency devaluation.
Conflicts and Trade Tensions
This continuous buying has only accelerated following Putin’s invasion of Ukraine and the subsequent freezing and confiscation of Russian assets. This set alarm bells ringing for many countries who have been pondering – perhaps it’s Russia now, but could it be us next? With global inflationary pressures and geopolitical tensions expected to remain elevated, gold remains a reliable asset for preserving wealth.
In addition to ongoing conflict, markets have also seen heightened trade tensions, fuelled in part by Trump’s erratic tariffs, threats, U-turns, and bullying of both friends and foes alike. The risk of recession in major economies, particularly the US, has markedly increased and this itself could continue to drive demand for gold as a protective investment.
Diversification in Investment Portfolios
Gold has a low correlation with other asset classes like equities and bonds, making it an effective tool for portfolio diversification. Investors can reduce portfolio risk and volatility by holding physical gold or gold-related mining stocks. This could prove especially valuable in 2025, as financial markets face heightened uncertainty from fluctuating interest rates, technological disruption, and shifting global economic dynamics. The latest example is Germany, which has embarked on massive and unprecedented spending in post-war terms. Meanwhile, China too is rolling out a series of economically stimulative policies as it grapples with a multi-year slowdown and a sluggish domestic market.
In summary, we remain just as optimistic about gold as we have been for many years. It’s important to note that central banks are buying a lot of gold but remain non-price-sensitive buyers. The fact that gold is trading at all-time highs doesn’t deter them. If anything, it’s possible to make a temporary and unlikely parallel with US retail buyers piling into the Magnificent 7 stocks regardless of their valuation. The key difference, of course, is that gold cannot be measured on any fundamental basis, whereas tech stocks can, and ultimately will be, as we are now witnessing.
IBOSS’ Gold Position
We have held the Ninety One Global Gold fund for many years to reduce our portfolio correlation.
We have maintained our 1-2% allocation, depending on the risk level of the portfolio, to the fund as we realised that at some momentum-driven growth, markets would come to an end. The explicit volatility of the fund is very high, and the drawdowns are extremely large compared to global equity funds. Still, the effect of adding the fund and separate sub-asset class can reduce the volatility of an equity portfolio. The gains, as well as periodic drawdowns, can also be outsized, and 2025 is a good example where the fund is up circa 25%.
Although gold funds often reflect physical gold prices, the relationship is not linear, and other factors come into play with mining funds, such as currency, cost of mining, and inflation.
Ninety One Global Gold vs. IA Global | 10 Years > 15/03/2025
This communication is designed for professional financial advisers only and is not approved for direct marketing with individual clients. These investments are not suitable for everyone, and you should obtain expert advice from a professional financial adviser. Investments are intended to be held over a medium to long term timescale, taking into account the minimum period of time designated by the risk rating of the particular fund or portfolio, although this does not provide any guarantee that your objectives will be met. Please note that the content is based on the author’s opinion and is not intended as investment advice. It remains the responsibility of the financial adviser to verify the accuracy of the information and assess whether the OEIC fund or discretionary fund management model portfolio is suitable and appropriate for their customer.
Past performance is not a reliable indicator of future performance. The value of investments and the income derived from them can fall as well as rise, and investors may get back less than they invested.
Data is provided by Financial Express (FE). Care has been taken to ensure that the information is correct but FE neither warrants, neither represents nor guarantees the contents of the information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Please note FE data should only be given to retail clients if the IFA firm has the relevant licence with FE.
IBOSS Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Financial Services Register Number 697866.
IBOSS Asset Management Limited is owned by Kingswood Holdings Limited, an AIM Listed company incorporated in Guernsey (registered number: 42316).
Registered Office is the same: 2 Sceptre House, Hornbeam Square North, Harrogate, HG2 8PB. Registered in England No: 6427223.
IAM 73.3.25