Gold stopped being a fear trade

Gold was up 64% in 2025 and has gained 10–11% year to date. Most commentary treats this as a signal about geopolitical anxiety. It isn’t — or at least, that explanation is no longer sufficient.

One Number

Gold’s two-year rise  ·  Author’s calculation based on spot price data on 1 April 2024 and 1 April 2026.

In the two years following the 9/11 attacks in 2001, gold rose 28%. In the past two years — a period of persistent geopolitical stress, war in Ukraine, Middle East conflict, and US-China tension — gold is up 109%. Either the world has become four times scarier, or something other than fear is driving the price.

One Argument

Gold has stopped being a measure of fear and started being a measure of momentum — and that distinction matters more than most investors realise

Gold’s historic safe-haven logic rested on one property: low or negative correlation with equities. When markets panic, gold holds or rises. But according to UBS data covering 126 years of returns, gold's correlation with equities is essentially zero across normal periods — the positive return shows up only when stocks are in genuine trouble. What it is not, historically, is an asset that rises simply because it has been rising. Until now.

Unhedged has pointed out that the gold price has had two other moves of this magnitude in the past 50 years — in 1979–80 and in 2011–12. Sharp reversals followed both. Both are now treated as speculative bubbles. What that comparison implies, but does not state, is that the necessary condition for both prior crashes was the same — gold had become expensive enough to attract speculators rather than allocators. The current move fits the pattern: gold is more expensive in real terms than at any previous point on record. That is not a fear premium. Gold is expensive because too many people have already bought it.

There is a serious case to be made for gold. The UBS Global Investment Returns Yearbook shows that since 1971 — when the US left the gold standard — gold's real annualised return has been 4.7%, well above its 1.3% long-run average since 1900. Central banks in emerging markets have been buying at record rates. And with 72% of global family offices holding no gold whatsoever, according to JPMorgan's 2026 Global Family Office Report, most of the money that could buy gold has not yet done so.

And yet this is precisely the warning sign. By the time the latecomers arrive, a move is usually closer to its end than its beginning. What gold can no longer do is function as an early warning signal. That usefulness has been priced out — the asset has become expensive enough to attract the kind of buyers who have made it more expensive still, which is the one condition that historically preceded both prior crashes.

One Position

Gold above $4,000 is not a portfolio allocation decision — it is a bet on what other people will do next. If you hold it, hold it for the right reason: as insurance against a scenario where equities and bonds fall simultaneously, not as a bet on continued momentum.

I am wrong if the speculators prove to be patient money. If they stay, this is not a bubble — it is gold being revalued for a different world.

The reasons to own gold are real. The price is not.

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Corporate Financier’s Notes

Published every Thursday. One number, one argument, one position — for senior professionals who want to think — and sound — like a corporate financier.