Gold has always been a topic of fascination for investors, especially during times of economic uncertainty. As of early 2025, the SPDR Gold Shares fund (GLD), designed to track the price of gold bullion, is showing impressive gains of approximately 11% year-to-date and a staggering 42% increase over the past year. Meanwhile, gold futures prices have also risen about 10% this year and are 36% higher than they were a year ago. This surge, however, comes amid a general market landscape where the S&P 500 index has only seen modest growth, up around 1.5% in 2025 and 17% over the last year. As these numbers flash across screens, investors might feel tempted to jump into gold investments, but doing so could lead to significant missteps.
As gold prices continue to climb, the fear of missing out (FOMO) can cloud judgment. Financial planner Lee Baker has noted a noticeable shift; where investors were absent from discussions about gold a year ago, they are now significantly more engaged. This surge in interest comes with a warning: many investors may be falling prey to the classic investing mistake of buying high and selling low. Baker aptly references Warren Buffett, reminding investors to remain cautious and to “be fearful when others are greedy.” This principle is particularly pertinent in the current climate, where rising prices can inflame greed and prompt knee-jerk reactions.
Gold is often seen as a safe haven during turbulent times—a perception that Sameer Samana, a senior global market strategist at Wells Fargo Investment Institute, confirms. With geopolitical tensions, economic instability, and inflation concerns swirling, many are once again looking to gold for refuge. However, while it may appear that the allure of gold as a safety net is justified in this environment, history indicates that bonds usually outperform gold during genuine crises. This distinction is crucial for investors who might be swayed solely by gold’s present attractiveness.
One of the reasons many flock to gold is the belief that it acts as a reliable hedge against inflation. Yet, investment data often challenges this assumption. Despite recent anxiety regarding stalled progress in curbing inflation, investors must critically evaluate whether gold is indeed the best option to protect against this risk. While rising inflation creates a supportive narrative for gold, investor behavior driven by short-term market movements may lead to decisions rooted more in anxiety than in strategy.
Sanctions imposed on Russia have acted as a significant catalyst for gold’s rising demand. These geopolitical tensions have prompted countries, particularly China, to increasingly purchase gold as a means of mitigating their exposure to U.S. Treasury bonds, particularly amid fears of access restrictions to dollar-denominated assets during conflicts. This surge has contributed to the current price explosion, yet it raises important questions about sustainability. Sustained demand driven by geopolitical tensions may not persist unchanged, raising the stakes for those investing in gold at this peak.
Expert Advice: A Measured Approach
Baker and Samana both caution against chasing gold returns indiscriminately. Their advice emphasizes the importance of positioning gold as a small percentage—ideally between 1% to 3%—of a diversified investment portfolio. Instead of directly investing in physical gold, which poses logistical challenges around storage and insurance costs estimated to be around 1% to 2% of the asset’s value annually, experts recommend considering exchange-traded funds (ETFs) or stocks of gold mining companies.
Additionally, both advisors advocate for a broader commodities approach, incorporating allocations across various sectors, including energy, agriculture, and base metals alongside precious metals like gold. A well-balanced commodities allocation may range from 2% for conservative investors to 7% for more aggressive growth strategies, according to Wells Fargo’s investment models.
As gold prices soar to new heights, the temptation to leap into the market is strong. However, investors should approach gold with caution, staying mindful of market histories and the principles of sound investment. By viewing gold through the lens of a broader economic strategy rather than a singular object of desire, investors can navigate the current landscape more effectively. Ultimately, educated choices grounded in comprehensive strategies will prove more valuable than impulses driven by momentary market trends.