In recent times, gold has attracted considerable attention from investors amid rising prices, notably increasing by a striking 11% in 2025. As of mid-Tuesday, this upward trend had also marked a remarkable 42% return over the past year. Meanwhile, gold futures are experiencing a remarkable gain of around 10% year-to-date and a staggering 36% rise when compared to the past year. These figures are appealing, especially against the backdrop of the S&P 500 index, which has recorded a meager increase of just 1.5% in 2025 and 17% over the past year.
The enthusiasm surrounding gold might seem justified at first glance; however, experts caution against impulsively jumping onto this gilded bandwagon.
Lee Baker, a certified financial planner, underscores the shift in sentiment regarding gold. A year ago, inquiries about gold from clients were scarce; today, they are commonplace. Baker urges caution, recalling the wisdom of Warren Buffett: “Be fearful when others are greedy, and be greedy when others are fearful.” This principle serves as a reminder that the current investor fascination with gold might be fueled by a wave of greed, potentially leading to costly mistakes.
Baker posits that diversification is key in a well-rounded investment portfolio. He advises that investors should limit their gold allocation to a mere 3%, suggesting that buying into the asset due to its upward trajectory could be a recipe for disaster. The tendency to purchase high and sell low becomes particularly pronounced when investor sentiment skews towards extreme optimism.
Gold has historically served as a bastion of safety during uncertain economic times. Sameer Samana, a senior global market strategist, affirms that the current climate indeed presents a sense of instability. However, he highlights a counterpoint: in genuine crisis situations, bonds have demonstrated superior performance compared to gold. This perspective encourages investors to reconsider gold’s traditional status as a reliable safe-haven asset.
Compounding the issue is the belief by many that gold stands as an effective hedge against inflation—a notion not consistently supported by historical data. Recent anxieties regarding inflation have surely heightened interest in gold, particularly in the context of long-standing U.S. sanctions against Russia that have significantly influenced the gold market. These sanctions have driven central banks, particularly in China, to acquire gold over U.S. Treasury bonds, effectively circumventing potential risks associated with dollar-denominated assets.
Investment experts believe that the surge in gold prices has a finite trajectory. Baker expresses skepticism about the sustainability of this bull market, stating, “There’s no reason in my mind gold will continue to have a significant uptrend unless we’re faced with extreme geopolitical turmoil.” With the current prices soaring, experts warn investors not to chase these returns but instead exercise patience and prudence in their investment decisions.
Given the logistical challenges associated with owning physical gold—such as storage, security, and insurance costs—Baker suggests exploring alternative avenues for gold investment. Options include exchange-traded funds or shares of gold mining companies, which provide liquidity and simplified management in volatile markets.
Both Baker and Samana advocate for a limited, strategic allocation of gold within a broader investment portfolio. For those inclined towards gold, a suggestion of anywhere between 1% to 2% may be prudent, while the broader commodity allocation could range from 2% to 7%, depending on the investor’s risk appetite.
Investors are encouraged to consider gold not in isolation, but as part of a diverse commodities portfolio that encompasses a variety of asset classes, including oil, agricultural products, and base metals like copper. Such a rounded approach can help mitigate risks associated with cyclical market fluctuations.
As investors are drawn to the allure of gold amidst rising prices, it’s essential to proceed with caution. Historical patterns paired with expert insights reveal that chasing after high returns can lead to undue risks and poor decision-making. By recognizing gold’s role as part of a diversified investment strategy, and adhering to principles of prudence and moderation, investors may find that opportunities for growth can be achieved without succumbing to market whims. The golden opportunity lies not just in the shiny asset, but in making informed choices that enhance overall portfolio stability.