At the time of this writing, gold was in the midst of a major downtrend in the futures market, being down 7% on the day. It was a rather extreme price swing for the beautiful metal, which had been in a major bull market until recently. Over the last five years, gold prices rose 168%, with a particularly sharp 55% upswing having occurred in the last 12 months.
The question investors will want to ask themselves here is, “should I buy the dip, or just stay put?”
We are living through an immense geopolitical upheaval, one that threatens to upend the entire international order. At times like this, maybe selling all your stocks and stashing gold under the bed isn’t such a bad idea. Still, the price gains observed over the last five years argue that a correction is in order. In this article, I will make the case that having a little bit of gold in your portfolio right now isn’t a bad idea.
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What history says will happen
Going purely off of historical price movements, gold appears to be due for a correction. The commodity has a long tendency of going through boom-and-bust cycles, and it has been booming for a good five years now. So investors ought not be surprised if their gold declines precipitously in value.
Why Gold might buck the trend this time
With all that being said, there is more to the story than just price trends. If investing were as simple as spotting a trend that played out in the past and then assuming that it will continue in the future, everyone would be rich. The question is whether or not the current trend in the price of gold will play out the way such trends usually do. There’s actually some reason to think that it won’t, and that the precious metal will either keep rising or plateau at the current, relatively high level.
The reasons are twofold:
- Central banks have been upping their gold purchases. Russia and China are both known to be buying gold, in a bid to “de-dollarize” their economies. The goal is to wean themselves off of the dollar so as to become more ‘independent’ in trade and manufacturing, invulnerable to U.S. sanctions and tariffs. The dollar is still the world’s reserve currency and currency of commerce, which means that Russia and China have not achieved their goal – based on this, we’d expect Russia and China to continue their gold purchases.
- The current economy is an environment of unbelievable risk and volatility. The involvement of the U.S. and Israel in a major war with Iran has caused the biggest energy crisis in four decades. In environments like this one, it helps to have some commodities in your portfolio — though I should state that oil is the really ideal commodity to own if this situation continues.
What to invest in?
If you’re interested in getting some gold in your portfolio, gold stocks make a lot of sense.
Consider Barrick Mining (TSX:ABX), for example. It’s a Canadian gold and copper producer with tonnes (literally) of proven production. The company produced about 870,000 ounces of gold last quarter, guided for 190,000 tonnes of copper production in 2026, and put out its highest-ever earnings per share [EPS] figure. It was a pretty good showing. And for my money, a better way to play gold than stashing bullion under the bed.
