Eureka? Why Fisher Investments UK Thinks You Shouldn’t Rush Into Gold

Gold! Have we got your attention? The shiny yellow metal crossed above $5,000 per ounce for the first time in history Monday morning, extending a run that has seen it double since 2024.^[i] Many commentators we follow now pump it as a fix to all that ails your portfolio—a vital piece of your asset allocation and a key means of diversifying amidst perceived geopolitical turmoil. But all this glittery wallpaper hides a boring old truth Fisher Investments UK has taught for years: We think Gold is just a commodity—a speculative, volatile one at that.

We know the arguments for gold today. It is allegedly a hedge against the dollar’s slipping versus several major currencies, which many commentators we follow cast as a risk that stretches beyond the US. We see many call it stable asset guarding against a shakeup in the global order as US President Donald Trump continues threatening tariffs. Other commentators we follow deem it vital way to diversify your asset allocation to guard against geopolitical instability and perceived financial instability as Japan’s bond markets keep swinging on Prime Minister Sanae Takaichi’s fiscal stimulus proposals.^[ii] And with rocket-like returns over the last year and a half, some imply gold is something everyone somehow just needs.

All of these feed into old claims about gold, and Fisher Investments UK thinks they have numerous problems. For one, we think it is fair to say instability isn’t new or unique to now. The world has endured plenty of iffy stretches where gold didn’t do so great. You might remember the world had a pretty rocky stretch in 2013 and 2014. There was Syria’s civil war, which briefly brought the threat of US and UK military intervention, and Russia’s invasion of Crimea—then Ukrainian territory. Gold fell hard in that two-year stretch, whilst stocks rose nicely.^[iii] Gold also fell during 2008’s global financial crisis.^[iv] And as the Trump administration enacted tariffs in 2018.^[v] It mostly fell alongside stocks during 2022’s bear market, which fell partly on investors’ frustration with hot inflation—something conventional wisdom says gold is supposed to hedge against.^[vi]

We know, we know. That was then, this is now, and gold is rockin’. But Fisher Investments UK thinks that is basically the problem with gold. Our review of gold prices’ history finds it is wild, prone to huge booms and busts. And both tend to start and end without warning, based on our analysis of contemporaneous financial commentary. We are old enough to remember when gold hit a record high in 2011 as the eurozone was in the throes of its debt crisis.^[vii] Many commentators we followed at the time said all the same things about diversification and gold finally having grown up to be a vital asset allocation component. Instead, gold fell -44.6% from its high on 5 September 2011 through its cyclical low over four years later on 17 December 2015.^[viii]

We think today’s arguments for gold also get some first principles wrong. When we review financial commentary, we see many articles use terms like “diversification” and “asset allocation” fast and loose. Fisher Investments UK thinks it is cleanest and most beneficial to draw a distinct line between the two. In our opinion, your asset allocation should be the blend of stocks, bonds and other securities that carries the highest likelihood of reaching your financial goals and funding your needs over your entire investment time horizon (the length of time your money must be invested toward your goals) and in accordance with your risk tolerance. To us, diversification means spreading your exposure within each asset class in order to mitigate risks and widen your opportunity set. Within stocks, that generally means spreading around major geographies, sectors and industries—and avoiding concentrated positions. Within bonds, it means not concentrating in a given bond type and maturity.

Gold is an asset. We think that means it isn’t a diversification tool, just as the point of owning stocks and bonds isn’t “diversification” but rather achieving some growth over time whilst reducing a portfolio’s expected short-term volatility relative to an all-stock portfolio.^[ix] For investors seeking long-term growth to fund retirement, Fisher Investments UK doesn’t think gold has a place in the asset allocation mix. Stocks and bonds are cyclical, meaning they tend to have regular periods of bull and bear markets, with demonstrable fundamental return drivers.^[x] We don’t think gold has that. Because it is a commodity with no industrial use and limited physical demand outside of jewellery, our research finds its sole return driver is sentiment. We find it is speculative, not tethered to the economic cycle. And again, whilst anyone can seemingly point to now as a time when some of the myths about gold seem to hold, Fisher Investments UK can point to plenty of times when they didn’t.

If you find yourself enticed by gold now, on the heels of its price milestone, consider: You can’t buy past returns. Gold’s history shows boom can turn to bust at any time, often when no one projects it—that is how speculative runs always end across all asset classes.^[xi] We think achieving long-term success with gold requires timing the booms perfectly at their start and end, then sitting out during the long fallow stretches in between. Anyone who had a history of doing this with gold would likely be an absolute living legend. But that person doesn’t exist. Buying in a feeding frenzy near the top and getting burned, sadly, is a common story wherever a speculative boom exists. See: Silver in 2020. Or 2011. Bitcoin last autumn. And so many others.

Lastly, a word on physical gold and fees. Whenever gold gets hot, we see an increase in people peddling physical gold. Many we have observed purport to be fee-free for several years. But make no mistake, even where there are no advertised fees, we find the providers still get their cut via marking up the price when you buy and marking it down when you sell. This is a widespread industry practice that you can observe when digging into the detailed materials these outlets provide. The difference between the market’s spot price (aka, what you see quoted online) and the price you pay/receive is their profit. It may not get called a fee, but a cost is a cost. There is no free lunch.

So please, do yourself a favour and see gold for what it is: an expensive commodity that requires you to be able to time wacky investor sentiment perfectly. A yellow metal that pays no dividend, generates no earnings and in our opinion has no demonstrable ties to the global economy. An illiquid lump that we find moves on emotion. Not a viable tool for diversification or improving the likelihood that your asset allocation will reach your goals, in Fisher Investments UK’s opinion.