Gold’s stealthy bull market

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published 25 February 2025

I am not as much of a gold bug. I sympathise with many of the criticisms. It is not a productive asset. It does not generate an income. It incurs storage costs, so you can even say that it has a negative yield. We are not returning to a gold standard, so the idea that it represents sound money is wishful thinking. These arguments are all very logical.

Yet gold also has a long history as a trusted store of wealth and there are logical reasons for that as well. It’s rare and expensive to mine. It looks the part – this is a social judgement, but one that has lasted for thousands of years. It does not tarnish, rust or corrode. It is dense. It has few industrial uses, so its value is set by investment or jewellery demand (ie, wealth-related purposes). Other materials have some of these desirable traits, but gold combines them all.

So regardless of any persuasive case against gold, it is still seen as valuable by a large number of people and that’s ultimately what matters. You don’t need to be a gold bug to recognise that it behaves differently to other assets and there are solid reasons why that’s likely to continue for the foreseeable future, which means that it can have a very useful role in an investment portfolio.

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Gold has certainly done very well for investors of late. The price has reached a record high in real (inflation-adjusted) terms, passing the record set in 1980. Yet this has been a surprisingly stealthy bull market: it would be an exaggeration to say that it’s gone unremarked, but there has been far less discussion about gold than during the big mid-to-late 2000s bull run. Even more surprising is that the amount of gold held by exchange traded funds (ETFs) – the most convenient way for most investors to hold gold – is lower than it was in 2020-2022, when the gold price perked up again after a few flat years.

This lack of curiosity is starting to change. Earlier this month, both Bloomberg and the Financial Times had lengthy articles about gold’s new highs. In truth, neither were very complimentary, implying that buyers are somewhere between mad and miserly. Gold bugs sometimes see this kind of commentary as a deliberate attempt to talk their favourite metal down, which is a stretch (the only asset that the investment industry is really desperate to discredit is cash because it earns nothing on cash savings, hence the incredibly misguided lobbying campaign to kill off the cash individual savings account (Isa) that the City is now waging). However, it reminds us that there is something about gold that makes many investors a little bit uncomfortable.

Perhaps it’s the nagging sense that gold is going up not because of a mania or a bubble (yet), but because the world is in a state of flux. In particular, a critical driver of demand has probably been the accumulation of gold reserves by central banks in emerging markets (eg, China), as they try to diversify away from the dollar. This still feels like a long-term trend. Any additional buying as gold comes out of the shadows – watch those ETF flows – would be a helpful extra boost.

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.