As economic landscapes change, so too does the narrative around gold. Investors are buzzing with questions: Is it too late to buy? Is gold a safeguard for wealth, or merely a speculative tool? How can we strategically position ourselves as we look toward Trump’s next term and beyond?
Gold has a longstanding reputation as a safe-haven asset, especially appealing when economies face instability. Recent events have added a new layer of intrigue, including central banks reducing interest rates, countries moving away from the U.S. dollar, and the BRICS bloc introducing a new currency concept. The anticipation has pushed gold’s value upward, but as markets correct post-election, the questions deepen. Gold’s recent dip to around $2,600 per ounce from its peak of $2,800 is a modest pullback after a $1,000 gain in a year, yet it has left many pondering where gold stands today.
For investors, the appeal of gold lies not just in its price movements but in its role as a wealth preserver. Owning gold is less about watching its price on a screen and more about safeguarding assets over time. Here’s a closer look at why this distinction matters and how a strategic view of gold can offer peace of mind amid the complexities of today’s economic environment.
Owning vs. Speculating on Gold
One of the first considerations in gold investing is whether you aim to own it outright or speculate on its value through paper-based investments. Physical gold, whether in bullion or coins, offers stability, freedom from counterparty risk, and the assurance of an asset in hand—a quality that resonates with central banks worldwide.
For speculative exposure, options like gold ETFs, mining stocks and futures contracts exist. These allow you to participate in gold’s price movements but lack the intrinsic security that physical ownership provides. Speculative gold holdings are tied to market fluctuations and can be affected by broader financial market trends. Physical gold, however, serves as a more solid store of wealth over the long term, especially in the face of global uncertainty.
For those with wealth to protect, the choice to own gold outright offers stability that speculative assets cannot match. If you’re considering a 3-to-5-year investment horizon, it’s worth focusing on two key factors:
1. The Dollar’s Stability and Inflation Trends
The U.S. dollar remains the world’s dominant currency, but cracks are forming. Central banks, including those of many emerging economies, are beginning to shift their holdings away from the dollar. Since early 2022, central banks have been increasing their gold reserves, signaling a wariness toward the dollar. The U.S. government’s sanctions, which froze Russian reserves, heightened these concerns, highlighting that assets held in dollars could, under certain circumstances, be locked up by political decisions.
This trend goes beyond just Russia. The BRICS nations (Brazil, Russia, India, China, and South Africa) are actively seeking alternatives to the dollar. China, for instance, is bolstering its global alliances, pushing for less reliance on U.S. currency. With these shifts in play, gold’s value as a non-political, globally recognized asset becomes more compelling.
In parallel, the dollar faces domestic challenges. With U.S. interest rates dipping, national debt climbing and inflation lurking, the dollar’s buying power may weaken further. Gold, by contrast, has shown resilience in inflationary periods, providing a safeguard when fiat currency value erodes.
2. Stock Market Valuations and Economic Cycles
The stock market’s current valuations are another factor to consider. One useful metric is the Buffett Indicator, which compares stock market capitalization to GDP. When Trump took office in 2016, this ratio was at 111%; today, it hovers around 205%, indicating that stocks may be significantly overvalued relative to the economy. In other words, the market’s size has outpaced economic growth, a sign that a correction could be due.
For affluent investors, this means exploring assets that provide security outside the conventional markets. During Trump’s previous term, gold appreciated by over 50%, proving its strength even amid a debt surge. This pattern could repeat, particularly if the current high valuations in stocks face a downturn.
Given the U.S. public debt is nearing $36 trillion and unfunded liabilities are estimated at around $220 trillion, the government’s traditional fiscal tools, such as interest rate adjustments, may not be as effective in the coming years. This makes gold a valuable alternative for wealth preservation, offering a hedge against the possibility of weakened economic measures and currency devaluation.
Gold as a Hedge Against Economic Uncertainty
In today’s economy, there are few certainties. High hopes aside, there is no quick fix for the economic challenges ahead.
During Trump’s first term, gold appreciated considerably, aligning with an increase in national debt by $7 trillion. This historical precedent suggests that gold may once again rise under similar fiscal conditions. Its role as a “hard asset” is invaluable when inflation looms, and government debts climb, protecting wealth where paper assets may falter.
No single asset can promise complete security, but gold has a proven track record of maintaining its value in times of economic turbulence. For investors, allocating a portion of wealth to physical gold provides a balanced approach to risk—offering protection if the dollar’s value declines while holding intrinsic worth that’s beyond the reach of fluctuating policies and market swings.
In a world of unpredictability, where the dollar faces pressures and stock markets may be overvalued, gold stands out as a safeguard—an asset rooted in history, trusted globally and removed from the risks associated with other financial instruments. In uncertain times, very few investments offer the same peace of mind.
Alex Ebkarian is the COO and co-founder of precious metals dealer Allegiance Gold
