Gold Finishes 2025 with a Bang, Historic Rally Continues Unabated
Gold finished the year just shy of $4500 per ounce, having started at around $2600, which represents an astonishing 73% increase in only on year. This follows an already robust 30% increase in 2024.
Price increases of this magnitude are rarely seen in the historical record, going back to 1970. We've only seen similar happen throughout the 70s, when the gold standard was officially ended, followed by the oil supply shock and a period of very high inflation. We also saw a sustained rally throughout the 2000s, but only after decades of languishing.
Geo-Political Factors Intensify, Fed Independence in Doubt
The common themes that have propelled gold throughout the last year are not only continuing, but appear to be intensifying. Again, in the past, the world lived in a relatively stable and predictable US-led liberal order, which allowed the dollar to be the default safe haven asset, supplanting gold for that period of time. However, that appears to continue unwinding at an accelerated rate, with lots of uncertainty about what a new world order might look like. Not to mention recent doubts about the independence of the federal reserve bank, which could potentially further erode trust in the dollar. Everything appears poised for continued support in the gold price, despite the strong run up so far.
Silver Steels the Show
As impressive as gold's rally is, it pales in comparison to its sister metal silver. Silver started the year at around $30 per ounce, and finished at around $80, which is a whopping 167% increase in only one year's time!
How to Invest?
A question we get often a lot is, given everything, how should one invest right now? Should we buy and hold more gold and silver even after such strong price action, or sell? (And obviously, anyone who knows the answer to that will soon be a very rich person!)
The real answer is you should never speculate and buy/sell on emotions, fear or hype or anything like that. Empirical research has thoroughly proven time and again that 95%+ of the population cannot profitably "play" the market. It's a fool's errand to try to predict what will happen with full confidence.
So to answer the investing question, what we recommend doing is deciding on an asset allocation beforehand, and sticking to it no matter what, rebalancing every so often as necessary. For example, a portfolio mix I personally like is 60% stocks, 20% cash/bonds, and 20% gold. So if I had $100k, I'd allocate $60k to stocks, $20k, to bonds, and $20k to gold. And if gold performs really well and grows to become 30% of the portfolio, I'd sell it down so that it comes back down to 20%, and buy the other assets that are relatively cheaper.
This accomplishes three things. 1) It naturally provides a well-diversified portfolio offering steady and consistent returns, 2) The concept of rebalancing allows you to naturally buy low and sell high, and 3) It removes any need to speculate and make arbitrary guesses, which as we established almost no one can do reliably well.