Gold Hits $4,000: Understanding the Rally and What It Means for Portfolios

Gold surged past $4,000 per ounce in early October, climbing nearly 50% since the start of 2025. It's the best year for gold since 1979, and investors are taking notice.

What's Driving the Move?

Central banks are buying aggressively. Poland added over 60 metric tons in the year ending August, while China, Turkey, Kazakhstan, and Azerbaijan made substantial purchases. These institutional buyers are less price-sensitive and keep buying as prices rise, creating sustained upward pressure.

The dollar is weakening. Down roughly 9% year-to-date, the greenback's decline is prompting a shift toward alternatives. Citadel CEO Ken Griffin recently highlighted concerns about investors "de-dollarizing" their portfolios away from U.S. sovereign risk.

Uncertainty is elevated. Between the October government shutdown, political instability in France and Japan, and ongoing trade tensions, investors are moving toward traditional safe havens. Gold-backed ETFs pulled in $26 billion in Q3 alone, driven by North American and European flows.

Our Take

Gold's performance has been inconsistent over the years, and it carries real risks as a diversification tool. As Opal President Wayne Wicker pointed out in recent Washington Post coverage, "Gold does not provide any income to protect against downside volatility." Unlike dividend-paying equities or bonds, it's purely a bet on price appreciation and portfolio insurance.

That said, we've long recognized gold's role in a well-constructed portfolio. Notable investors like Ray Dalio have suggested 15% allocations, particularly because gold tends to perform when traditional assets struggle. Our view is more measured: a modest allocation can provide diversification benefits without sacrificing income generation or taking on unnecessary volatility.

A Few Things to Keep in Mind

Gold may have momentum, but corrections happen. The Commodity Futures Trade Commission has cautioned consumers about volatility, and some analysts expect pressure if economic uncertainty eases.

Mining stocks like Newmont and Barrick have more than doubled this year, offering leveraged exposure but they come with company-specific risks that go beyond the metal itself.

And remember: gold is a strategic hedge, not a growth play. Its value lies in portfolio protection during uncertain times, not maximum returns.

The Bottom Line

Gold's rally reflects real concerns about dollar stability, geopolitical risk, and the shifting global reserve system. The $4,000 milestone is significant, but it doesn't change the fundamentals of sound investing.

At Opal, we help advisors and their clients build portfolios designed to weather a range of market conditions. The key is maintaining discipline, avoiding emotional decisions, and staying focused on long-term objectives, regardless of where gold trades tomorrow.

To read the full Washington Post article, visit: https://wapo.st/4o7C8ZB