What’s Next For Gold? - Financeflashcards

With a whopping 50% rally in 2025, gold has outperformed most of the major equity indices and hedge funds; only bitcoin has delivered more returns in a year. Gold is one of the few commodities whose price is supposed to be “telling us something.”, and a recent historical surge followed by a violent reversal does tell us something.

Gold As a Safe Haven

Gold has historically been seen as an asset which provides a buffer when traditional assets tumble. You feel the market is uncertain and risky, so buy gold. You want to hedge against inflation, buy gold. If you have $1,000, you don’t care how many ounces you get because it’s been treated as a safe haven until now. The recent volatility in gold futures prices has made us have a second doubt before investing in gold.

According to Bespoke Investment Group, there were six occasions in the past 20 years when gold prices began the U.S. trading day below 3%. In the following month, its price was down as much as 19% from the opening price.

Fear or Greed?

Gold is an almost pure hedge against chaos, but the recent rally has been as much about greed as about fear. It isn’t that the supply of gold has suddenly dropped or that world peace has suddenly broken out. As far as one can think, there could be two possible explanations.

First, the market has been seen as overvalued continuously, which public figures like Jamie Dimon and Fed chairman calling market the be “Fairly Overvalued”, which leads the investor to look for safer investments like gold, now, this pattern lead to our second explanation “Herding behaviour”, people tend to follow pattern and try to replicate what’s the crowd is doing, which further push the price up.

What’s Next?

You don’t need to subscribe to a newsletter or call your broker for advice. Short-term moves in any asset without earnings, whether a meme coin, stock or commodity, shouldn’t be overanalyzed.

Gold’s big move in the past several months is worth thinking about for people who invest in anything. History has shown in the past that a big move is often followed by a correction period, and since 2023, we have yet to see a year in which gold has delivered a negative return.

Adding gold at this price is like taking a bet where you are almost certain to lose with very little reward. If history were to be kind and repeat itself, we would see a negative return in gold very soon.

The Bottom Line

Seen as a safe haven, gold has entered a price level, delivering a whopping 50% return in a year. With both market fear and greed, gold might have entered a price level where it might be difficult for it to sustain. With no negative return in the past three years and now this significant move, it might be due for a correction. If the history of 1980 repeats itself, we may see a correction up to 20% in the upcoming year.

Table of Contents

Gold As a Safe Haven

Fear or Greed?

What’s Next?

The Bottom Line