What every investor needs to know about gold’s historic rally — whether it continues or not

It’s up 55% this year and up nearly 25% since late August – trouncing US and global stocks and stealing headlines. It plays on trade war angst, lingering inflation fears, geopolitical gyrations – and of course, its own iconic and distinctly glittery allure.

But the price of gold, after hitting an all-time high of $4,359.40 on Oct. 20, has since tumbled 4.5% inside of a week. If you rode gold’s rocket ride up, good for you. But that makes this an even better time to address – steely-eyed – just what gold actually is.

To be clear, in this column I will not be forecasting gold’s price, down or up. I learned not to do that 50 years ago – and needless to say, I like to predict lots of stuff. My last gold column, from December 2023, showed how the most common arguments for gold are myths that don’t help determine its direction. 

Popular, pyrite-infused pitches to investors include gold’s supposed benefits as an inflation hedge. There’s also gold’s supposed protection against stock declines and recessions. The fact is, long-term, gold is simply not high-returning. Instead, it yields sky-high volatility as it rides on unpredictable, boom-bust speculation.

Since that column, gold has boomed. Many claim tariff fears and US-China trade tensions have spawned a global flight to “safety” – and more Fed rate cuts – which render no-yield gold more competitive versus interest-paying assets.

These are just new twists on old, wrongheaded notions that gold is a safe haven. Consider: Most pundits presume tariffs are either inflationary or recessionary – making gold a legitimate hedge. Really? Let’s unpack this suspiciously heavy suitcase and see what’s inside.

First, zero evidence shows gold is a tariff shield. The only major precedent since the gold standard’s 1970s demise is Trump’s first term, when he deployed various levies (China anyone?) and threatened others. So what happened? Gold lagged the march of US and world stocks from 2017 through 2020.

Gold also doesn’t protect against inflation or market swoons. In 2022, both myths shattered when gold tumbled 20% – just 5% less than stocks. Some safe haven!

You know inflation hit 40-year highs then. How did falling gold hedge that? It didn’t. But once gold started rising again, global stocks did, too. A good hedge should do the opposite – rise when stocks fall.

Yes, gold has soared spectacularly lately. But look longer term: Since 1974, after the US ended the gold standard’s final restrictions, gold annualized 7.1% gains through September. That’s just 0.1% above 30-year US government bonds – an underwhelming premium to say the least. 

Meanwhile, US stocks annualized 11.5% over that stretch. World stocks notched 9.6%. Those annualized differences may seem small. But long term, the gap between gold and stocks is gargantuan. The cumulative return since 1974 for gold is 3,306%. For US stocks, it’s 28,340% – more than eight times as much.

Again, gold is vastly more volatile as measured by standard deviation. Its shorter-term booms like this year’s typically are isolated – falling between unpredictable big busts and long fallow periods. The latter include the 28 years between the high gold hit in 1980 and when it reached that level again in 2008. (Note: Inflation ran that whole time). 

So, timing gold is key. Yet with few fundamental factors driving it, you have no non-sentiment basics for any prediction. Most investors struggle to time stocks or bonds, despite lower volatility and much higher frequencies of gains. Why attempt something hugely harder that hinges on divining other investors’ feelings?

Effectively, gold’s siren song is playing musical chairs with hard-earned money. Indeed, its myths are deep-rooted relics for investors – long symbolizing wealth and power across cultures. Emotionally, people crave reasons to extend that to markets now. But repeating falsehoods doesn’t make them true.

If you profited from gold’s 2025 boom, that is something to celebrate. But it’s also high time to plan around something that works better long-term with lower volatility – and yes, maybe a little less glitter.

Ken Fisher is the founder and executive chairman of Fisher Investments, a four-time New York Times bestselling author, and regular columnist in 21 countries globally.