Anyone who decided to invest in gold early in 2024 was well-rewarded, and the global instability that had defined much of 2025 continued the yellow metal’s strong run. But with gold selling off in recent months, many are questioning whether gold is still a good investment.
Gold prices have steadied since then, recovering to around the $4,000 level at the start of November. Gold prices are still up over 50% so far in 2025. So does the recent gold selloff signal it's time to sell, or is it a buying opportunity?
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Why now might be a good time to buy gold
With UK inflation hitting 3.8% in July, August and September, almost double the Bank of England’s 2% target, UK investors worried about the impact of rising prices on their portfolios might be considering gold as one way of hedging against inflation.
“Gold prices (a classic inflation hedge) have pulled back from their highs,” said Henry Allen, macro strategist at Deutsche Bank.
The heat has certainly come out of the gold rally but many experts believe that the core fundamentals driving gold demand remain in place.
The Federal Reserve cut US interest rates on 29 October, as expected, which helped arrest the downturn in gold prices as low interest rates are typically positive for investing in gold.
“Lower interest rates favour non-yielding assets,” said Nikos Tzabouras, senior market analyst at Tradu. “Meanwhile, continued central bank buying remains bullion’s bedrock amid a broader de-dollarisation trend, while debasement trends linked to mounting global deficits further strengthen the metal’s appeal.”
Tzabouras added that ongoing geopolitical uncertainty in Ukraine and Gaza, where the ceasefire has looked strained ever since it came into effect, are also underpinning gold demand.
Gold for diversification
One of the most compelling arguments for investing in gold is the diversification that it can offer to a portfolio.
“When bond yields stand at higher levels, shares and fixed income investments tend to track each other higher and lower,” says Tom Stevenson, investment director at Fidelity International. “That reduces the incentive to own a mixture of both bonds and shares. And it means that investors need to look further afield, into commodities and property, to gain that portfolio balance.”
Gold, by contrast, has “low-to-negative correlation to equities”, according to Raymond Backreedy, chief investment officer at Sparrows Capital. It also typically sees lower drawdown rates, which Backreedy says is “particularly desirable especially in times of market stresses”.
While it is of course not guaranteed to persist, there is some rationale behind the relationship.
“Historically, gold has a proven track record of performing well during economic uncertainty and global conflicts due to its intrinsic value, which is why many investors see gold as a safe haven,” said Rick Kanda, managing director at The Gold Bullion Company. “During times of conflict, investors steer away from investing in assets such as stocks and bonds, as geopolitical events often threaten the infrastructures supporting these assets.”
Is AI driving gold demand?
Often it’s the macroeconomic factors that determine the gold price, especially the rate of US inflation.
Gold is therefore often viewed as a commodity with no industrial applications, in contrast to silver which serves a multitude of important purposes in industry. Lots of investors trade the two metals based on the gold-silver ratio which tracks the relative price of gold to silver. (At the time of writing, the gold-silver ratio is around 83; values above 80 have historically preceded strong rallies in the silver price.)
Gold is an important raw material in some industries though, one notable example being electronics. Gold is a superb conductor of electricity, and is therefore frequently used in high end electronic devices. There is almost certainly some gold in the device you’re using to read this article.
As prices rose between 2001 and 2011, electronics manufacturers sought ways to move away from gold, with demand for gold in electronics peaking in 2010.
However, according to the World Gold Council, artificial intelligence (AI) is helping to prompt a recovery in this market. The processors, memory chips and sensors which are being deployed at vast scale to build the data centres that train models like ChatGPT all use gold in their construction.
“Gold's superior conductivity ensures that data can be processed and transmitted at high speed with minimal energy loss,” wrote Louise Street, senior markets analyst and Trevor Keel, consultant, at the World Gold Council. “Furthermore, gold's resistance to corrosion ensures component longevity and durability – critical for continuous and intensive AI applications.”
Is now a bad time to invest in gold?
On the other side of the ledger is the fact that gold has seen a sustained period of gains, and investors might be concerned that gold prices have now peaked.
Gold prices have gained 47% in dollar terms over the past 12 months, comfortably outperforming the S&P 500 during that time. Gold also hit its all-time high in real terms (adjusted for inflation) during September for the first time since 1980.
Those who have held gold during this period could be tempted to take some profit on their gains by selling off a small portion of their allocation. Those who haven’t might feel that now isn’t the best time to dive in, given that gold is still trading at close to the highest level in its history.
“Gold is an interesting investment at times of uncertainty but given its high price, a large amount of uncertainty and/or lower interest rates have already been priced in,” said Joost van Leenders, senior investment strategist at Van Lanschot Kempen.
How much gold should you buy?
If you do decide that now is the time to buy gold, the final question is how much gold to buy.
Given the fact it pays no interest and has a historical tendency towards volatility, few experts advise investing a substantial part of your portfolio into gold.
When building multi-asset portfolios, “we typically allocate 3-10% [to gold] using the gold ETCs available on the market, depending on user case and overall percentage allocated to the defensive asset class”, said Backreedy.
“It's better to take a long term view on portfolio construction and outcomes, and from this perspective, gold can act as a compliment to fixed income from a defensive perspective and as a portfolio diversifier.
“As such, we look to the above benefits of gold over the long term, rather than focusing on the short term price.”
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