Scepticism around gold's place in portfolios has grown in some circles, yet today’s economic and geopolitical backdrop arguably makes the metal more relevant, not less.
With elevated debt levels, persistent inflation pressures, currency volatility and rising political uncertainty, it is sensible for investors to reconsider why a measured allocation to gold can still offer strategic value.
Why gold still offers unique value
Gold behaves differently to traditional assets. It doesn’t rely on earnings or coupons and it rarely moves in perfect step with equities or bonds. Gold's lack of yield means it’s judged for what it is, rather than a claim on future cashflows.
This difference is often cited as a flaw but in portfolio construction it is precisely what gives gold its usefulness. It can behave as a shock absorber when mainstream assets move together. While gold’s correlations can shift over time, that unpredictability itself becomes a diversifier.
Academic research has shown that during elevated uncertainty gold’s returns show a positive and strong relationship with composite uncertainty indicators, meaning gold may shine when uncertainty spikes.
But investors should recognise that gold is not a perfect hedge in every scenario, its effectiveness depends on the type of uncertainty and market conditions.
Hedge against macroeconomic and geopolitical risks
We live in a world where governments are running large fiscal deficits, central banks are navigating persistent complex inflationary pressures and there are monetary policy interventions, currency volatility and geopolitical tensions.
Gold’s long-standing status as a store of value, trusted across centuries and cultures, makes it an attractive ‘insurance policy’. This remains true even as markets evolve.
Central banks have also remained steady buyers in recent years. The World Gold Council reported that central banks added 53 tonnes of gold in October, a 36% increase from September.
Senior analysts at the WGC noted that much of this demand is coming from emerging market central banks and their annual survey suggests the buying is strategic in nature.
As a result, it cannot be ruled out that a new, higher baseline of central bank demand is beginning to form.
As a strategic (not speculative) allocation
The case for gold doesn’t rely on timing the market or chasing short-term highs. A modest long-term allocation, typically around 5–15% of a portfolio and adjusted as conditions evolve, can act as a stabiliser and hedge.
Gold is not a ‘one size fits all’ solution; its behaviour, like any asset, shifts with the environment. But held strategically rather than tactically, it can help mitigate drawdowns and provide ballast when markets become unsettled.
Addressing the scepticism
Critics rightly highlight that gold can be volatile, offers no income, and doesn’t always move in predictable ways. But these characteristics are inherent to what gold is: an asset outside the traditional financial system.
When investors rely solely on cashflow-generating assets, they concentrate exposure to the same economic forces. Gold’s independence is precisely why it behaves differently.
Historical market patterns show that during major stress events, whether financial, economic or geopolitical, gold has often held its value better than many conventional assets.
While no single asset performs reliably in every crisis, gold is one of the very few that has repeatedly demonstrated resilience when both equities and bonds have struggled simultaneously. Its liquidity, global acceptance and lack of counterparty risk strengthen this role.
Conclusion
Gold’s limitations are real, it produces no income and its behaviour can vary across cycles. But if viewed not as a growth engine but as a strategic, defensive component of a broader portfolio, its purpose becomes clearer.
Gold is, in effect, insurance against the kinds of systemic risks, currency debasement, debt stress, inflation shocks and geopolitical fractures, that periodically reshape markets. Very few assets can credibly play that role.
Funds
The HANetf Royal Mint Responsibly Sourced Physical Gold ETC offers a physically backed option with the added diversification benefit of custody outside of the financial system, held at the Royal Mint’s high-security vault.
It is also Shariah-compliant and partially backed by recycled gold, appealing to investors with sustainability objectives. Investors may redeem in physical form, if necessary.
The Jupiter Gold & Silver Fund provides a complementary approach for those seeking an actively managed precious metals allocation. Though this article focuses primarily on gold, silver often behaves directionally similarly during periods of stress and can amplify returns in certain environments.
Jupiter’s blend of physical exposure and selected mining equities allows the manager to adjust between defensiveness and upside potential. It introduces an additional return lever while still keeping gold at the core of the investment thesis.
Sheridan Admans is founder and chief executive of Infundly. The views expressed above should not be taken as investment advice.