Gold (CME: GCJ6) has glittered brightly over the last two-plus years, gaining 176% since October 2023, to $5,055 an ounce.
The precious metal hit a record high of $5,595 on Jan. 29 this year. It rose 0.8% Monday, the first trading day after the bombing of Iran. Yet it fell back 5% Tuesday to $5,055.
It’s no great surprise that for the long term, some big investors are very bullish on gold, and some are very bearish. Hedge fund heavyweight Ray Dalio, who founded Bridgewater Associates, falls into the bullish camp. He says gold is the safest place for investors to park their capital and recommends putting 5%-10% of your portfolio in the precious metal.
Investment icon Warren Buffett, founder of Berkshire Hathaway (NYSE: BRK), heartily disagrees. He has called gold an unproductive, “do-nothing” asset that relies on fear rather than intrinsic value. Unlike businesses, it generates no cash flow, and it has vastly underperformed stocks through history.
Berkshire has never owned gold, though it did briefly own shares of miner Barrick Gold in 2020 (It’s now named Barrick Mining (NYSE: B)).
Looking at gold’s gain since 2023, some of the demand has reflected economic fundamentals. Central banks have been buying it as they diversify away from the dollar. They purchased 1,955 tonnes of gold in 2024-25 combined.
But other conditions haven’t matched what are historically seen as factors behind gold’s strong periods. Gold often has been a hedge against inflation. However, inflation has decelerated during gold’s recent surge. U.S. consumer price inflation registered 2.4% in January 2026, down from 3.7% in September 2023.
Geopolitics, financial markets, speculation
Geopolitical turmoil also can boost gold. Yet things were relatively calm over the last three years until the bombing of Iran. There have been wars in Ukraine and Gaza, of course, however they were contained. The Iran conflict undoubtedly helped gold to gain Monday, but apparently no one cared by Tuesday.
Volatile financial markets can lift gold too. Yet stocks have been on a steady uptrend over the last three years, and bond yields have dipped since October 2023, although there has been up and down movement.
What seems to be the biggest support for gold in the last 29 months is speculative fervor. Speculators saw a rising asset and jumped on it. They purchased gold along with other assets that have risen: stocks, private credit, high-yield bonds. Individual investors also have gravitated to gold, not wanting to miss out on the rally.
But there is reason for caution. Gold can fall down as easily as it can run up, as Tuesday’s decline shows. After hitting a record peak of $850 in 1980, the precious metal didn’t reach that level again until 2008. And in inflation-adjusted terms, it didn’t reach that level until last September. So gold isn’t always a good hedge of inflation.
If the Iran war widens, gold may well resume its ascent. Still, at some point the speculative thirst for it may ebb.
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