A sharp look at gold’s historic surge, emotional drivers, and why it shouldn’t be mistaken for growth.
KEY TAKEAWAYS
Gold’s price reflects collective human emotion more than intrinsic economic value. Its history looks like a mood cycle rather than a balance sheet.
Parabolic moves in gold signal crowding and fear, not safety. Volatility at these levels should be expected, not dismissed.
Gold functions best as insurance against fear-driven shocks. Expecting it to generate long-term wealth misunderstands its role.
Central bank gold buying is about signaling and diversification, not maximizing returns. Headlines around it often amplify private investor fear.
Portfolio sizing matters more than the gold narrative itself. Small allocations hedge risk, large ones embed pessimism.
MY HOT TAKES
Gold is not broken, but it is being misused. Treating fear insurance like a growth strategy is a category error.
The rise of Bitcoin weakens gold’s monopoly on fear hedging. If fear has alternatives, none should be treated as sacred.
Parabolic price action is not confirmation–it’s compression. When expectations narrow, fragility rises.
Central banks buying gold says more about politics than prudence. Investors who copy that behavior miss the context entirely.
If gold feels comforting, ask yourself what you’re afraid of. That answer matters more than the metal itself.
You can quote me: “Gold is like a fire extinguisher–if it’s working exactly as intended, you barely notice it–if it suddenly becomes the most important thing you own, the room is probably already on fire.”
Going for gold–don’t meddle with the metal in your medal. The winter olympics are in full swing and countries large and small are all fighting for gold medals. I watched some of that gold hardware being passed out this weekend and wondered if there was actually gold in those beautiful trinkets. I really did wonder. So, naturally, I enquired of my “digital” staff of three (Google, OpenAI, and Anthropic 🤣) and I learned that, in fact, olympic gold medals are actually 92% silver and then gold plated. They were made of solid gold in 1904, 1908, and 1912–which is insane when you think about it. Now, I know that it is not the intrinsic gold value that these young men and women seek when they dedicate the better part of life and limb to get one of those gold medals. Even if it is the actual gold they seek, I still can’t stop wondering what the intrinsic value of the gold really is. Check out this chart–and let’s talk.
That’s right, I simply can’t leave gold out of my thought cycle. This weekend, I saw a headline that Secretary Scott Bessent said that the past few weeks of gold volatility was the result of speculative traders centered in China, which only scratched at one of my open wounds. A few weeks back I wrote about the metal’s parabolic gains and questioned its source, relating that business folks are taught to be skeptical about anything that has a growth path that looks like the chart above. Volatility at these heights should be expected because of that steep growth vector. I ended by stating that this chapter in gold history was far from the last one.
As I was trying to calculate the value of one of those olympic golds (I just can’t help myself), I noticed gold back above $5000 an ounce once again. As I shook my head–not doubting but still…misunderstanding–I reminded myself that gold was $35 an ounce before President Nixon abandoned the gold standard in 1971. Initially gold went up, as you might guess, but it remained comfortably between $100 to $200. Another spike in the 1980s as gold was adopted as an inflation hedge brought it to the $500 level where it sat until 2005. It really took on some teeth in the wake of the financial crisis, topping $1000 only to trade sideways in a wide range until 2023 when it began its now historic rocket ride to $5000.
Let’s go through this again. Gold’s history reads less like a balance sheet and more like a mood ring. It moves when people feel something deeply enough and collectively enough to act on it. Fear of inflation. Fear of war. Fear of bad policy. Fear of other people’s fear. That last one matters more than most investors are willing to admit. Gold does not respond to productivity, innovation, demographics, or earnings growth. It responds to anxiety, uncertainty, and distrust. 😰 Those forces are powerful, but they are also fickle. Human emotion is not a stable input. Go ahead… read that last sentence again.
That’s what makes gold so hard to pin down as an “investment.” It doesn’t produce anything. It doesn’t compound. It doesn’t reinvest. It doesn’t hire workers or invent new technologies or generate cash flow. It simply exists, quietly, waiting for humans to assign it meaning. When confidence is high, gold is boring. When confidence breaks, gold becomes profound. That alone should tell you something about what it really represents.
The argument often made is that gold is a hedge. Against inflation. Against currency debasement. Against policy error. Against geopolitical chaos. All true, to a point. But they are only hedges because of the human emotions that are evoked by those catalysts. Now, hedges are supposed to be insurance, not engines of wealth creation. Insurance is something you hope never pays off. If it does, it usually means something else has gone very wrong. When investors start expecting equity-like returns from an insurance policy, they’ve misunderstood the product.
That misunderstanding becomes clearer when you look at substitutes. Bitcoin has entered the conversation not as a replacement for gold’s industrial uses or physical properties, but as a replacement for its emotional role. Scarcity. Distrust of institutions. A hedge against “the system.” Whether one believes in Bitcoin or not is almost beside the point. The fact that it can exist as a parallel fear proxy weakens the argument that gold holds some unique psychological monopoly. If fear can flow into multiple vessels, then none of those vessels should be assumed to be sacred.
And if we’re being honest, history offers no shortage of objects that once carried deep emotional and financial meaning, until they didn’t. Tulips. Beanie Babies. Cabbage Patch Kids. Each had a moment when people believed they were storing value, signaling status, or protecting themselves from missing out. They weren’t irrational in isolation. They were irrational in scale. Gold avoids being lumped into that category largely because it has been around longer and has been used by central banks, kings, and empires. I suppose longevity adds legitimacy, but it does not eliminate psychology.
Central bank buying is often cited as validation. If official institutions are accumulating gold, the thinking goes, then surely it must be prudent. But central banks are not maximizing returns. They are managing optics, reserves, and political narratives. Buying gold can be about diversification, yes, but it can also be about signaling independence, projecting stability, or appealing to domestic audiences. When that buying becomes headline news, it amplifies fear among private investors, who interpret it as confirmation rather than context. That feedback loop matters more than the actual commodity changing hands.
This is where volatility enters the picture. When gold moves in slow, steady ranges, it behaves like a hedge. When it goes parabolic, it behaves like a trade. Parabolic moves are not evidence of safety–they are evidence of crowding. They are the market’s way of telling you that expectations have compressed into a narrow set of assumptions. That doesn’t mean the story is wrong. It means the price is fragile, as we have witnessed in recent weeks.
The recent surge to levels that would have sounded absurd just a few years ago is less mysterious when viewed through that lens. We have layered fears on top of one another. Inflation anxiety. Fiscal anxiety. Political anxiety. Geopolitical anxiety. Add a dash of leverage, some speculative flows, and a media ecosystem that thrives on dramatic narratives (which I am adding to right now, lol), and suddenly gold looks less like a hedge and more like a referendum on collective nerves.
That doesn’t make gold useless. It makes it specific. Gold is not there to make you rich. It is there to make you less vulnerable to certain types of shocks. That distinction is crucial. Expecting gold to behave like equities over long periods is like expecting a fire extinguisher to pay dividends. If it’s working exactly as intended, you barely notice it. If it suddenly becomes the most important thing you own, the room is probably already on fire. 🔥
This is why portfolio sizing matters so much. A small allocation to gold can make sense if your goal is diversification against tail risks driven by human fear. A large allocation implies a worldview where fear is not just persistent but dominant. That is a bleak investment thesis. It assumes stagnation, distrust, and recurring crisis as the baseline rather than the exception. History, for all its messiness, has not rewarded that view over long horizons.
Equities, despite their volatility, represent claims on creativity, ingenuity, and progress. They fluctuate, sometimes violently, but they are tied to real economic activity. Gold floats above all of that, detached from output and effort. It is a shadow price of sentiment. Useful in moderation. Dangerous in excess.
So if you want to own gold, own it with clear intent. Not because it has gone up. Not because someone on television said central banks are buying. Not because it feels safe when everything else feels scary. Own it because you understand that fear spikes, fear fades, and fear hedges should be sized accordingly.
And if you disagree, that’s fine. Markets thrive on disagreement. Just remember that when fear becomes fashionable and gold starts feeling like a growth asset, you may want to stretch first. Maybe start practicing your ski jump form. The Winter Olympics will be back in 2030, and who knows what those medals might be worth by then. And imagine 2034 in Salt Lake. By that point, we might not even be arguing about gold anymore. We’ll just be arguing about the next thing we’re all afraid of.
FRIDAY’S MARKETS
Stocks rallied as investors felt pity for beaten-down tech shares and bought the dip. Consumer sentiment rebounded a bit and inflation expectations eased according to the latest data from University of Michigan. Fear/speculative gauges gold and bitcoin gave their nods of approval to the risk-on move.
NEXT UP
No eco data today, but the FOMC chatter brigade will be out in force today as we hear from Waller, Miran, and Bostic.
The week ahead features lots of important earnings announcements, Retail Sales, ADP NER Pulse, housing numbers, Consumer Price Index / CPI, and the monthly job numbers. Download the attached calendars so you can actually BE the smartest person in the room. 😉
Important earnings today: Cleveland-Cliffs, Apollo Global Management, Dynatrace, Becton-Dickinson, Kyndryl Holdings, Upwork, and ON Semiconductor.