Gold Dominates 2025: Price Soars 40%, Bonds Decline

Gold experienced a historic surge in 2025. From an initial price of $2,658 per ounce at the beginning of January to $3,600 in September, the price jumped nearly 40 percent. The largest growth was recorded in the first quarter, when gold outperformed all major asset classes and set new records above $3,400. After brief corrections in the spring, the trend accelerated again, driven by expectations of monetary policy easing, increasing demand from central banks, and declining confidence in bonds.

As a result, gold has topped investment desires this year. Traditionally viewed as a hedge against inflation and geopolitical turmoil, its price in 2025 reached records and a 40 percent increase, marking the best performance since 1978. When compared to global stock markets, which also report solid returns, they still cannot measure up to gold. Bonds, on the other hand, are entering another year of disappointing results.

Why Bonds No Longer Protect Portfolios

U.S. Treasury bills and European government bonds have served as a safety net in portfolios for decades. Their value typically increased during periods of economic slowdown when stocks fell. However, this relationship only held while inflation was low and stable. Since the peak in 2020, European government bonds have lost about 20 percent of their value, while U.S. long-term bonds have lost even half. Since the beginning of 2025, benchmark European bond indices have fallen an additional 2 percent, underperforming compared to stocks and commodities.

For investors relying on the classic 60/40 strategy (60% stocks, 40% bonds), results have fallen short of expectations. Over the past five years, such portfolios have yielded only 32 percent returns, while the S&P 500 alone has risen 109 percent. Moreover, the diversification role of bonds has weakened, leading portfolios to experience similar volatility and deeper losses than pure equity allocations. Ultimately, inflation remains the main enemy of bonds, eroding real returns and stripping them of their status as a “safe haven.” In this vacuum, gold takes on a central role.

Protection Against Double Risk

As bonds lose their protective capacity, investors are increasingly turning to gold, an asset that is weakly correlated with other classes and can cushion blows from both the equity and bond segments simultaneously.

Examples such as the sell-off after ‘Liberation Day’ in April showed that stocks and bonds fell in sync, without an alternative refuge. Similar patterns were seen in the 1970s, during a period of high inflation and weak credibility of central banks, when, as now, gold was the winner.

Goldman Sachs analysts highlight that portfolios combining stocks and bonds are most vulnerable in two scenarios: when confidence in institutions collapses (1970s) and when supply shocks trigger stagflation (2022). In both scenarios, gold has historically delivered exceptional results.

Central Banks Lead the Trend

The key impetus for demand comes from central banks, especially in developing countries. After Western sanctions in 2022 froze Russian foreign exchange reserves, countries like China, India, and Turkey accelerated the process of reducing dependence on the dollar, investing billions in gold. According to IMF data, central bank purchases of gold have increased fivefold since February 2022.

Private investors are following the same path. The world’s largest ETF tracking the price of physical gold, SPDR Gold Shares (GLD), attracted $11.3 billion (€9.63 billion) in new investments just this year, on track to surpass the record set in 2020.

Unlike bonds, gold does not depend on the credibility of governments or monetary institutions. It cannot be printed, devalued, or subjected to sanctions. In a world of rising debts, political polarization, and institutional risks, this is an increasingly desirable quality.

Political Risk Fuels Demand

High levels of public debt and loose fiscal policy further jeopardize the outlook for bonds. If central banks are forced to artificially keep yields low to service debts, so-called ‘financial repression,’ real yields could remain negative for years.

Particularly in the U.S., concerns are growing about potential political influence on monetary policy. Donald Trump’s attacks on Fed Chairman Jerome Powell raise the question of whether the independence of the U.S. central bank will be compromised, and thus its ability to curb inflation. Goldman Sachs estimates that shifting just 1 percent of U.S. private investments from government bonds to gold could raise the price to nearly $5,000 (€4,263) per ounce. In a more moderate scenario, gold could reach $4,000 (€3,410) as early as mid-2026.

The historic surge of gold in 2025 transcends short-term market trends. It signals a deeper change in investment priorities. As bonds lose their defensive role and political risks undermine confidence in monetary institutions, gold reasserts itself as the ultimate safe asset. Its independence, inflation resistance, and lack of correlation with other classes make it a key stabilizer for portfolios at a time when traditional protective mechanisms are failing. In strategies that have relied on bonds for decades, gold is increasingly taking center stage.