Will gold keep running?
It is outshining most liquid assets in 2025. Up 20 per cent through Aug 22 and 56 per cent since the end of 2023, its gains top US, Singapore and world stocks – to say nothing of Singapore and global bonds’ puny returns.
Singapore’s status as a global finance and transit hub has goldbugs flocking to stash their gold on its shores – adding to its allure.
If you rode the shiny yellow metal up, great for you! But don’t rest on your success. Now is roughly the time to count yourself lucky, and sell this alleged “safe haven”. Let me explain.
First: I am not forecasting gold’s direction or returns. I never do that and don’t believe anyone can do so reliably.
Yes, my last column on gold – published in May 2023 – came just before an -8.4 per cent swoon through that October. But it was not a gold market call.
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That column highlighted that most common arguments for gold are fiction and don’t help determine its direction – even as many touted its supposed benefits as an inflation hedge, insurance against stock declines and recession safeguard (alongside the Monetary Authority of Singapore’s buying) as reasons to own it.
Beyond that illusion, I also noted gold is historically markedly more volatile than stocks, with little industrial use and lower long-term returns. Gains cluster in big booms and busts, requiring impeccable market timing, or luck. Which brings us to 2025.
Safe haven?
Everyone says gold’s first-half gains stemmed chiefly from US President Donald Trump’s tariffs and threats, spurring a global flight to “safety”. Goldbugs expect more ahead.
Meanwhile, US Federal Reserve rate cut expectations fuel claims that gold will gain as lower rates allegedly render no-yield gold more competitive versus interest-yielding assets.
That narrative puts a new veneer on old, wrongheaded notions of gold hedging against inflation, market chaos or recession.
Consider tariffs. Most pundits presume tariffs are inflationary, so broad increases must mean higher prices globally, spurring hedge demand. But tariffs aren’t inflationary – inflation is about excess money creation by central banks.
Others say tariffs risk a bear market for stocks in anticipation of an economic downturn, making gold a desirable haven. Yet, there is zero historical evidence that gold is somehow a tariff shield.
The only precedent since the gold standard ended in the 1970s is Trump’s first term, when he targeted China with tariffs and threatened others.
Singapore stocks may have lagged gold from 2017-2020, but that stemmed from Singapore’s huge financials sector skew.
Compare gold to global stocks and the shiny stuff comes out lagging slightly over that stretch. Notably, it also fell during 2018, the apex of trade tensions. That isn’t what a good hedge should do.
Yes, gold soared amid 2025’s tariffs and related fears. But tariffs themselves didn’t drive that boom. What did? It isn’t fundamentals. Gold has few industrial uses outside jewellery. It has no profits, dividends or yield.
The answer: investor demand. Sentiment – full stop. And this is why gold returns tend to cluster in irregular and unpredictable big booms.
Performing well with gold requires participating in those huge booms – and avoiding the busts and fallow periods between them. That requires epic market timing, but can you do that reliably?
Timing the market?
Gold’s returns are positive in 59 per cent of rolling 12-month periods since 1975. That lags Singapore stocks’ 61 per cent slightly, and is far lower than US and world stocks’ 77 per cent and 75 per cent, respectively.
Most people struggle to time entry and exit points in stocks. Why take on something far harder that hinges almost solely on others’ feelings?
Moreover, markets – including commodity markets – pre-price widely known fears. Endlessly discussed tariffs and threats are likely already hugely baked into gold prices.
Beyond tariffs, gold doesn’t help protect against inflation or bear markets, either. Recent history – as recently as in 2022 – shatters both ideas.
Singapore inflation galloped that year, hitting highs of 7.5 per cent year on year that August alongside similar US and global accelerations. Gold? It ticked down.
While gold rose early in 2022, it fell 16.9 per cent from its high in early March through November’s low – not exactly a “safe haven”.
Goldbugs’ new claim that lower interest rates will make the shiny metal more competitive further shows the illogic. The high inflation many call good for gold usually means high rates. So high rates and low rates are now supposedly both golden for gold? If true, gold would never fall. You can’t have it both ways.
With no fundamental factor driving gold, you have nothing to evaluate what lies ahead. You are either grasping at straws, chasing heat or acting on mythology.
If you had success over the last year in gold, accept this reality: You got lucky. That is no way to invest over the longer term.
The writer is the founder, executive chairman and co-chief investment officer of Fisher Investments, an independent investment adviser serving both individual and institutional investors globally
