Is gold the safe haven it’s cracked up to be, or are investors again piling in at precisely the wrong time?
Gold surged 27 per cent in 2024 and is already up by a quarter in 2025. After briefly topping $3,400, prices slipped lately but sentiment remains heady, as evidenced by recent headlines alluding to talk of a $5,000 gold price.
Indeed, “Gold $5,000?” is the title of a recent note by Research Affiliates’ Dr Campbell Harvey.
He sees plausible reasons for gold’s gains, namely increased economic uncertainty coupled with new investment sources such as gold ETFs and China’s de-dollarisation push.
Countries like China may be buying gold not for return, but to reduce exposure to the US dollar system, especially after the West’s financial sanctions on Russia in 2022.
That kind of structural, strategic buying isn’t price-sensitive in the way investor speculation is – it’s about long-term risk management and sovereignty.
Still, Harvey issues a sober reminder: gold is as volatile as stocks, but doesn’t reliably beat inflation or generate steady returns. After peaking in 1980, it fell into a deep bear market that didn’t end until 2001.
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Harvey says gold prices usually behave a bit like a stock’s price-earnings ratio: when it runs unusually high, future returns tend to disappoint.
Could this time be different? Maybe – a loss of faith in the US dollar’s reserve currency status “could thrust gold into a new regime”, says Harvey.
Gold has also held up in eight of the last 11 equity drawdowns and often outperforms during recessions.
Still, at these levels, history leans bearish, even if the flows are bullish.
