Still on the Sidelines? Why Gold Has a Place in a Well-Diversified Portfolio
20 May 2025
Read Time 5 MIN
Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s portfolio benefits.
Tariff Turbulence: April’s Policy Whiplash Shakes Markets
It’s fair to say that most market participants were left disoriented after April’s economic rollercoaster. The month began with the announcement of a 10% “universal” tariff on 2 April1—an announcement that proved to be anything but universal. Canada and Mexico were excluded, certain sectors and products were exempt, and over 50 countries were instead hit with additional “reciprocal” tariffs ranging from 11% to 50%2.
Just days later, confusion deepened when those same reciprocal tariffs were suspended—except for China, where cumulative tariffs reached an effective rate of 145%3. Countries across the world scrambled to craft retaliation measures while financial markets struggled to price in the flurry of conflicting announcements on an hour-by-hour basis.
Gold: From Panic to Defensive Asset Class
Gold and gold stocks were swept up in the turmoil during the first volatile week of April. Margin calls, investor panic, broad selling pressure, and a rush to raise cash pushed gold below the $3,000 mark, hitting a monthly low of $2,983.27 on 8 April.
However, gold’s traditionally stable investment status was soon reaffirmed, rising to new highs throughout the month and trading intraday as high as $3,500 per ounce on 22 April. As of 6 May, gold is up 101.7% over the past five years4. Investors should keep in mind that past performance is not a reliable indicator of future results, and that investment in gold is subject to risks, including volatility and the risk of investing in natural resources.
While other asset classes also began to recover as the month progressed, gold stood out—rising 5.29% in April.
By comparison, the S&P 500 fell 0.68% and the U.S. dollar declined 4.55%. Treasuries experienced early selling pressure, with the 10-year yield briefly spiking to 4.5% on April 11 before settling at 4.2% by month-end5. Gold ultimately closed April at $3,288.71 per ounce6. While these assets are not directly comparable in nature—gold is a commodity, the S&P 500 an equity index, and the dollar a currency—they are often viewed as competing stores of value or lower-volatility options during periods of volatility.
Gold Miners: A Tale of Two Halves
Gold miners, as represented by the NYSE Arca Gold Miners Index (GDMNTR), performed exceptionally well in the first half of April, outpacing both gold itself and broader equity markets7, it is important to mention that past performance is no guarantee of future results. However, as risk appetite returned and equity markets rallied later in the month, investor enthusiasm for gold equities cooled, and miners underperformed. It is important to note that investing in gold mining stocks carries distinct risks, including exposure to small- and mid-cap companies, operational volatility, and sensitivity to broader equity sentiment.
Separately, the month also illustrated the strong correlation between western investment flows and the gold price.
A Missed Opportunity for Most Investors?
With only about 1% of global assets under management allocated to the gold sector as estimated by the World Gold Council back in 20238, it’s clear that the vast majority of investors have missed out on gold’s exceptional performance this year. When we speak with those who are now starting to pay attention, our conversations typically revolve around a key question: am I too late?
Many investors see gold’s 25% surge this year—on top of a 27% gain in 20249—and assume the rally must be nearing its end. Interestingly, these same investors may have been actively participating in equity markets that have risen nearly every year for the past 16 years.
Why Gold Still Has Room to Run
The S&P 500 has posted annual gains nearly every year since the 2008 financial crisis—except for 2015, 2018, and 2022—and is up 53% just since the start of 2022. Yet even after the market turmoil of April and an increasingly uncertain outlook, most investors remain hesitant to reduce their equity exposure or reallocate capital.
Gold, by contrast, has seen far less participation. Investment demand remains well below prior peaks. Given the strength of gold’s recent rally, a short-term pullback is neither unexpected nor concerning. In fact, gold could be in the process of forming a new, higher base—possibly around $3,000 per ounce10.
If investor demand for gold increases meaningfully in the coming months, it could amplify the price impact already being driven by strong central bank buying. Based on historical correlations between gold ETF holdings and the gold price, a return to the 2020 peak in ETF holdings could reflect shifts in investor sentiment and flows.
While risks remain —such as persistent inflation, geopolitical tensions, and the potential for economic slowdown—gold and gold equities continue to attract attention as part of diversified portfolios, particularly during periods of elevated volatility or macro uncertainty. Their role as potential hedges or long-term stores of value is being reexamined by both institutional and retail investors.
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1 Reuters. (03.04.2025)
2 BBC. (10.04.2025)
3 Bloomberg. (09.04.2025)
4 World Gold Council. (14.05.2025)
5 Bloomberg data. (11.04.2025)
6 FT. (30.04.2025)
7 World Gold Council. (12.05.2025)
8 World Gold Council. (27.04.2023)
9 World Gold Council. (09.05.2025)
10 World Gold Council. (14.05.2025)
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