Gold's glow today
Kevin Gardiner Global Investment Strategist
Q4.
Kevin, what are the main drivers behind gold’s strong performance in 2025?
Gold has been widely viewed as a long-term store of value for thousands of years. Recently, geopolitical uncertainty, declining interest rates, a softer dollar and residual inflation risk have made gold’s “safe haven” characteristics more attractive than usual.
Specifically, Mr Trump’s proposed tariffs have threatened to reverse the globally-integrated business model. His apparent rejection of the US-European defence partnership, amidst ongoing trauma in Ukraine and the Middle East, and tension around Taiwan, has fostered a sense that the world is becoming more dangerous. At the same time, his “Make America Great Again” campaign has undermined support for the dollar, as have his browbeating of the Federal Reserve (which has been cutting interest rates anyway) and his planned tax cuts, which will likely result in an (even) larger fiscal deficit.
These developments are all manageable, in our view, but at the margin they have understandably boosted the appeal of gold.
Q5.
Is gold overvalued at current levels, or are fundamentals still supportive?
Gold has no income associated with it, and as with other commodities this makes it hard to decide what its right or “fair” value might be. Relative to consumer prices – that is, adjusted for inflation – it does look historically expensive, but in itself that is not a good guide as to how the metal will trade in the months (and even years) immediately ahead.
Chart 1: Price of gold in nominal and inflation-adjusted terms
Source: Bloomberg, Rothschild & Co (as of June 2025
Q6.
How should investors think about gold today?
The absence of a dividend or coupon not only makes gold difficult to value, but it also makes it difficult to view as a predictable source of investment return. Instead, gold is best viewed as adding a degree of weight to portfolios – as an asset that can diversify some of the risk attached to other assets such as inflation for bonds and cash and even sometimes equities.