Gold’s Remarkable 2025 Performance: What It Means for Your Portfolio
Gold has delivered exceptional returns in 2025, surging over 55% year-to-date, while traditional portfolio allocations to the precious metal may no longer be adequate given current economic conditions. If you haven’t reviewed your gold allocation recently, now is the time.
2025: Gold’s Breakout Year
While market attention focused on Bitcoin, private equity, and private credit, gold quietly became one of 2025’s top-performing assets. As of October 10, 2025, gold has climbed 55.17% year-to-date, reaching $4,000 per ounce and setting 39 new all-time highs through September alone.
This performance wasn’t just theoretical in the commodity, it translated directly to equity markets. For example, Newmont Corporation (NEM) the world’s largest gold miner has gained approximately 96% year-to-date making it the third-best performer in the S&P 500 trailing only Palantir Technologies (109%) and Seagate Technology (99%). Meanwhile, the S&P 500 itself has returned just over 9% during the same period.
The Driving Forces Behind Gold’s Rally
Central Bank Accumulation
Perhaps the most significant structural change supporting gold prices has been unprecedented central bank buying. According to the World Gold Council, central banks have purchased over 1,000 tonnes of gold annually for three consecutive years (2022-2024), more than double the 400-500 tonne average of the prior decade. This trend is expected to continue with approximately 900 tonnes of purchases projected for 2025.
Gold’s status has evolved dramatically. It’s now the second-largest global reserve asset at 19% of central bank reserves, surpassing the euro and trailing only the U.S. dollar (47%). The World Gold Council’s 2025 Central Bank Gold Reserves Survey found that 95% of central bankers expect global gold reserves to increase over the next 12 months, with a record 43% anticipating increases in their own holdings.
This isn’t just emerging market diversification. Poland announced plans to increase its gold reserves from 20% to 30% of total reserves, while other developed nations including Germany and France have signaled renewed interest in gold accumulation.
Currency Diversification and Geopolitical Uncertainty
The acceleration in central bank gold purchases reflects deeper concerns about currency debasement and geopolitical risk. The COVID-19 era saw unprecedented monetary expansion across developed economies, raising long-term inflation concerns. Additionally, the weaponization of the U.S. dollar through sanctions following Russia’s 2022 invasion of Ukraine prompted many nations to reassess their reserve compositions.
Gold offers unique advantages: it’s immune to sanctions, free from counterparty risk, and has maintained purchasing power across centuries. These are qualities increasingly valued in an uncertain geopolitical environment.
Traditional Inflation Hedge
Gold has historically served as an inflation hedge, and this relationship has held firm. With inflation remaining above central bank targets despite recent moderation, gold continues to appeal to investors seeking to preserve purchasing power.
The Portfolio Allocation Question
For decades, the standard recommendation for gold allocation in a 60/40 portfolio hovered around 5%. However, recent research suggests this may be insufficient.
What the Research Shows
Multiple academic studies and institutional analyses now point to higher optimal allocations:
Flexible Plan Investments conducted a comprehensive 50-year analysis (1973-2023) and determined that an optimal gold allocation of 17% produced the highest risk-adjusted returns for balanced portfolios.
Sprott Asset Management recommends 10-15% allocation to gold and gold-related equities, noting gold’s low correlation to other asset classes and its role as an effective diversifier.
World Gold Council research demonstrates that even a 5% allocation to gold improved portfolio Sharpe ratios by 12% while reducing overall volatility. Their analysis suggests allocations of 5-10% for most investors, with potential increases depending on market conditions.
GraniteShares and VanEck both recommend 5-20% allocations depending on investor risk profiles and economic conditions, with higher allocations appropriate during periods of elevated uncertainty.
In the current environment which is characterized by positive stock-bond correlations, persistent inflation concerns, and geopolitical tensions an allocation at the higher range may be justified.
Key Questions for Your Portfolio Review
As you evaluate your portfolio with your financial advisor, consider:
What is your current gold allocation? Many traditional 60/40 portfolios still maintain only 2-5% in alternatives, which may include gold alongside other commodities.
Has your allocation kept pace with changing correlations? The breakdown of the traditional negative correlation between stocks and bonds means gold’s diversification benefits have become more valuable.
Are you exposed through physical gold, ETFs, or mining equities? Each offers different risk-return profiles and tax considerations.
When was your last rebalancing? With gold up 55% this year, your allocation may have drifted significantly from targets.
Is your portfolio manager actively managing this allocation? Given gold’s strong performance and evolving role, passive approaches may no longer be optimal.
The Path Forward
Gold’s 2025 performance has been extraordinary. The structural factors supporting it such as central bank demand, geopolitical uncertainty, inflation concerns, and currency diversification suggest this isn’t merely a speculative bubble. The precious metal has reasserted its role as a strategic portfolio asset.
While no one can predict future returns, the evidence points to gold deserving a more prominent place in diversified portfolios than traditional allocations might suggest. With most research supporting allocations of 10-15% or higher in the current environment, portfolios holding only 2-5% may be underexposed to one of the most reliable sources of diversification available.
The question isn’t whether to hold gold, but whether your current allocation adequately reflects both the asset’s proven benefits and the unique challenges of today’s economic landscape. If you would like to review your portfolio, contact us today.
Sources and Further Reading
World Gold Council. (2025). “Gold Mid-Year Outlook 2025” and “Central Bank Gold Reserves Survey 2025”
J.P. Morgan Research. “Gold Price Predictions and Forecasts”
Flexible Plan Investments. (2024). “The Role of Gold in Investment Portfolios”
Sprott Asset Management. “How Much Gold Should I Own in My Portfolio?”
World Gold Council. (2025). “Gold as a Strategic Asset: 2025 Edition”
State Street Global Advisors. “Gold 2025 Outlook: More Room to Run”