Part 2: Gold – The Timeless Hedge and What It Means Now
May 26, 2025•6 min read
If you missed yesterday’s market recap and the shift from FOMO to caution, catch up on Part 1: Today, we’re diving into gold’s role as a timeless hedge — and why it’s capturing attention right now.
Gold: The Timeless Hedge; A Sunday Brunch Reflection
Given Beaufort’s ongoing focus on education in private equity and portfolio management, I thought this was the perfect time to reflect on an asset class that’s been a hedge against world liquidity crises, inflation, and market chaos for centuries: gold.
Let’s be honest — gold isn’t going to send you a dividend check, and it won’t make you rich overnight. But its “economic DNA” is unique: it’s scarce, tangible, and immune to central bank printing presses. With just over 216,000 tonnes ever mined and annual supply growth of only 1.6%, gold is the ultimate “can’t print more of it” asset.
Why does this matter now? Because gold’s real power is as a portfolio stabilizer. When inflation runs hot, currencies wobble, or markets get the jitters, gold often shines brightest. Central banks and institutional investors know this — hence their steady accumulation, especially in times of geopolitical tension.
Gold’s negative correlation with stocks and bonds means it often zigs when everything else zags. A modest allocation (say, 5–10%) can help smooth out the ride, especially when markets are swinging between fear and FOMO. Sure, gold can be volatile and pays no yield, but as a strategic hedge (especially in a world of monetary experimentation and ballooning debt), it’s still a powerful tool for diversification and wealth preservation.
So, as you contemplate your portfolio over that second cup of coffee, ask yourself: does your strategy have enough ballast for the next storm? In a world where liquidity can vanish overnight and headlines can turn on a dime, that old yellow metal still deserves a seat at the table.
Gold Is Booming; So… Should It Be in Your Portfolio?
Gold is having a moment. Prices have surged to all-time highs in 2025, headlines are full of gold fever, and investors are piling in. But amid the hype and the headlines, it’s worth asking: does gold really deserve a place in your portfolio?
Let’s be clear: gold is not a magic bullet. It doesn’t pay dividends. It doesn’t generate interest. And despite its reputation for stability, gold can swing wildly in price. So why do so many experts still recommend holding gold — usually 5–10% — in a diversified portfolio?
The answer lies in gold’s unique economic DNA. It’s scarce, tangible, and globally recognized. You can hold it in your hand, and no central bank can print more of it. That physicality and scarcity are what set gold apart from stocks, bonds, or even cryptocurrencies.
Scarcity and Safe-Haven Status
Here’s the basic math: just over 216,000 tonnes of gold have ever been mined. Each year, mining adds only about 3,500 tonnes — a growth rate of just 1.6%. This tight supply, combined with gold’s durability, makes it a classic “safe haven.”
When inflation runs hot, currencies wobble, or geopolitics get messy, investors flock to gold. Unlike paper money, gold can’t be conjured out of thin air!
What’s Driving Gold’s Surge?
In the past year, gold outperformed every other major metal, rising 27% in 2024 and breaking the $3,200 per ounce barrier in 2025. Why?
Three big reasons:
- Persistent inflation and expectations of more monetary easing weakening currency values.
- Escalating geopolitical tensions and trade wars; global currencies are now weapons of war rather than couriers of value.
- Worries about global financial stability and ballooning government debt and the desire to hold assets unrelated to this uncertainty.
It’s not just individuals buying gold. Central banks and institutional investors are also increasing their holdings, often through exchange-traded funds (ETFs).
The Real Role of Gold: Diversification and Risk
Gold’s real value isn’t about chasing quick gains. It’s about balance. Gold moves differently than stocks or bonds, often rising when other assets fall. This “negative correlation” makes it a powerful diversifier. Over the long term, gold has delivered nearly 8% annualized returns since 1971 — matching equities and beating bonds and many commodities.
Crucially, gold shines brightest in times of crisis. When inflation spikes, markets tumble, or currencies falter, gold often holds its value — or even climbs. That’s why it’s called a hedge. It won’t make you rich overnight, but it can help protect your wealth when everything else is falling apart.
The Drawbacks: No Yield, Some Volatility
Let’s be honest: gold isn’t perfect. It pays no income. Its price can drop, especially when the economy is strong and investors are feeling bold. That’s why most experts say gold should be a minority position in your portfolio — enough to cushion the blows, not so much that you miss out on growth elsewhere.
The Outlook: Still Relevant in 2025?
Today’s gold rush is driven by a mix of inflation, uncertainty, and scepticism about fiat currencies. Analysts see prices ranging from $2,900 to $3,700 per ounce this year. Gold’s liquidity, lack of credit risk, and dual role as both an investment and a consumer good (think jewellery and tech) keep it relevant — even as new asset classes emerge.
The Bottom Line
Gold isn’t a cure-all. But in a world of uncertainty, it remains a unique and valuable tool for investors looking to diversify and defend their portfolios. If you want a hedge against inflation, currency shocks, or market meltdowns, gold deserves a place at the table — just don’t bet the farm on it.
Ed’s Final Word
After last week’s FOMO sprint, markets have paused to catch their breath. Volatility is back, and headlines are a reminder that, while central banks and trade deals can move markets, fiscal realities and inflation still matter. Hedging against these risks isn’t necessarily in debt markets – more traditional assets like gold are also around for hedging.
For private equity and risk asset investors, it’s time to stay nimble, keep an eye on liquidity, and remember discipline, not euphoria, wins the long game.
💡 And speaking of gold… Wednesday, we’ll be officially unveiling a new opportunity for investors looking to access physical gold through expertly graded coins. These coins represent not just wealth preservation but a piece of tangible value, blending investment potential with beauty and history. We’re proud to share that this idea came from conversations with some of our Beaufort members — and I can’t wait to reveal more.
Stay tuned for the full launch announcement tomorrow — it’s one you won’t want to miss.
As always, these are the thoughts and opinions of mine and no one else’s—not even Beaufort Private Equity Limited. Please do your own research before making investment decisions and reach out to your Beaufort relationship manager if you have any queries or follow-ups.
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– Practicing Chartered Accountant; experienced (25+ years) finance professional for regulated financial services organisations – Director and co-owner of Gibraltar FSC regulated Company & Trust Management Company – Strong financial modelling and financial planning and analysis for FTSE listed financial conglomerate – Treasurer (£1BN of AUM and £250M of regulatory capital) for regulated financial services organisation – Board experienced (both Group and subsidiary) along with leadership chairing committees – Experienced at running large multi located departments and teams – Corporate Finance experience in both technology, private equity and banking M&A – International audit experience UK GAAP, US GAAP, IFRS and Gibraltar GAAP – Strong managerial finance, financial accounting and financial internal control including Sarbanes Oxley audits – ERP implementation experience in Oracle and NetSuite and online accounting systems – Big 4 ACA qualification with treasury, finance, corporate finance and consultancy experience – Cambridge university education
