Gold has been making headlines once again. After posting an impressive 25.5% gain in 2024, gold prices have continued their climb, jumping 6.4% in January 2025 to reach a new record high. By comparison, the S&P 500 delivered a total return of 25% last year and gained 2.8% in January—meaning gold is now outpacing the stock market.
But what’s behind this gold rally? Why are investors rushing to gold despite stable interest rates? More importantly, should you consider gold as part of your portfolio right now?
Exploring why should you consider investing can provide insights into the importance of financial planning, diversification, and long-term wealth-building strategies. Understanding different asset classes and how they react to economic changes is key to making informed decisions about financial growth.
https://unsplash.com/photos/gold-and-silver-round-coins-y7jRMXOz7pE
Why Is Gold Outperforming the Market?
Gold’s rising value is fueled by a mix of economic uncertainty, geopolitical events, and market speculation. Understanding these factors can help investors decide whether gold’s recent surge is part of a long-term trend or just a short-term reaction.
One of gold’s biggest appeals is its role as a safe-haven asset during times of economic uncertainty. Even though the Federal Reserve has kept interest rates steady, inflation concerns haven’t disappeared. Traditionally, lower interest rates boost gold prices because they reduce borrowing costs and make non-yielding assets like gold more attractive.
But what happens when rates stay high? Geopolitical risks often play a bigger role in driving gold’s price—and that’s exactly what we’re seeing in 2025.
How Are Global Events Impacting Gold Prices?
In early February 2025, President Trump imposed new tariffs on three major U.S. trading partners:
- Canada (25%)
- Mexico (25%)
- China (10%)
These tariffs could increase costs for businesses and consumers, potentially driving inflation higher. Historically, such economic disruptions push investors toward gold, as it is seen as a stable asset during market volatility.
Additionally, China remains a major force behind gold’s demand. The People’s Bank of China (PBOC) was the largest official sector gold buyer in both 2023 and 2024—and early reports indicate that China is continuing its aggressive gold purchases in 2025. If this trend holds, gold prices could climb even further.
Is Gold a Better Investment Than Stocks?
Many investors wonder: Should I invest in gold instead of stocks? The answer depends on how you view gold in the context of your portfolio.
Gold behaves very differently from stocks. Stocks generate value through company earnings, dividends, and business growth. Gold, on the other hand, has no earnings, no dividend payments, and no direct cash flow. Its value is purely based on market demand and investor sentiment.
While gold can act as a hedge against inflation or economic downturns, it doesn’t offer the long-term growth potential that stocks typically provide. This makes gold more of a protective asset rather than a wealth-building one.
For retail investors, a long-term perspective is essential. Instead of trying to time the gold market, a more strategic approach is to allocate a small portion of a portfolio to gold, through exchange-traded funds (ETFs). This approach allows investors to gain exposure to gold without being overly reactive to price movements.
Final Thoughts
Gold’s strong start in 2025, coupled with last year’s impressive gains, underscores its role as a hedge against uncertainty. However, investing in gold requires a different mindset than investing in stocks. While stocks generate returns through earnings growth and dividends, gold’s value is largely sentiment-driven.
For investors considering gold, a balanced approach is key—whether through long-term allocation strategies or alternative safe-haven assets. As market conditions continue to evolve, understanding gold’s risks and rewards is crucial before making any investment decisions.
