Gold is back in the headlines, but is it genuinely creating value or just riding a wave of mood and momentum? This article challenges the seductive simplicity of long term return charts, explores why gold defies traditional valuation logic and asks whether today’s record prices reflect fundamentals or collective psychology.
As Oscar Wilde is alleged to have said, there are “lies, damned lies and statistics.”
This phrase came to mind when recently looking at charts showing the return on gold.
The gold price has increased by around 60% this year to around $4,200 per ounce at the time of writing (3 December 2025) which is close to its all-time high. Clearly, holding gold this year would have been a good investment.
The conclusions from looking at the gold price movement this year can also be supported by one reaching back 25 years to 2000 to give the impression that gold is a consistently good investment; the price of gold has increased by 1,340% from the beginning of 2000 to today. The performance of gold is often compared with the performance of equities over the corresponding periods: an increase of around 17.5% to date this year and 635% over the longer 25-year period (based on the S&P 500 return with dividends reinvested). These comparisons are often shown as graphs to emphasise the greater returns from gold.
So, do these data and graphs support buying gold? Is it still good value?
Nick Maggiulli, the author of Just Keep Buying, a book that argues for investment in income-producing assets, has pointed out in his blog that the 25 year period from 2000 has been carefully chosen; it starts when equities were close to their peak value before the crash of the dot-com bubble and gold was close to its lowest value since 1979.
In contrast, comparing the performance of the gold price since 1990 (up around 950%) to the S&P 500 (up around 3800% with dividends reinvested) tells a different story – it pays to be a little sceptical of summarised data.
Investors are currently concerned about the stability of the US dollar, the traditional safe haven currency, given high US debt levels, exacerbated by the continuing high US trade deficit, concern about US inflation and President Trump’s continuing trade wars. Investors are also becoming increasingly concerned that global stock markets may fall if the benefits from developments in artificial intelligence prove illusory. Both investors and central banks have been buying gold.
So, do these political and economic changes support the current price of gold? Or is it now overvalued?
Professor Aswath Damodaran from the Stern School of Business at New York University considers any question about the value of gold pointless as it doesn’t generate cash flows which can be valued based on their expected timing and risk. Instead, he considers gold to have features of commodities, currency and collectables, mainly being a collectable (little is used as a commodity, apart from creating collectables, and it is not a very efficient currency). It is a collectable, being desirable primarily for aesthetic and psychological reasons.
The attractiveness of gold as a collectable, alongside items such as paintings and other artforms, is supported by its scarcity, its durability (as it is chemically stable and does not corrode) and its desirability (people have collected it for millennia).
Professor Damodaran further argues that, although gold is priced every day, this reflects supply and demand and is mostly based on mood and momentum. As it cannot be valued, it can only be priced.
It is often argued that gold is attractive as a hedge against inflation and as a safe haven when there are fears of a crisis but is unattractive in a period of high real interest rates (since it provides no income). However, evidence from comparing historical gold price movements against inflation and interest rates is weak.
I agree with Professor Damodaran that gold is priced and cannot be valued. There have been a number of recent factors that have led to its huge price rise this year; where the price goes next will depend on mood and momentum, which can be very fickle factors.
*the views expressed are the author’s and not ICAEW’sSources
Articles
- What’s Going on With Gold? – Nick Maggiulli, 28 October 2025
- A Golden Year (2025): Gold's Price Surge – The Signal in the Noise! – A Damodaran, 6 November 2025
