Newsletter 72: 🥇 Gold’s Rollercoaster: Still the Ultimate Safe Haven?

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When markets swing wildly, people rush back to one timeless question — “Should I buy gold?”

I’ve been watching the metal’s wild ride lately — a massive surge earlier this year, then a sudden 5% drop in a single day. Let’s break down why gold has such a powerful hold on investors, what caused the latest price swings, and whether it still deserves a spot in your portfolio.

🏛 1. Why Gold Became the Ultimate “Safe Haven”

Gold has always had this almost mythical status — not just because it shines, but because it endures.
For thousands of years, gold has been a store of value and even the foundation of money itself.

When the Bretton Woods system ended in 1971, gold was set free to trade as a true market commodity. Since then, its price has reflected one thing above all — trust (or lack of it) in paper currencies and global stability.

Investors flock to gold when:

Inflation eats into real returns
The U.S. dollar weakens
Geopolitical tensions rise
They just want to diversify away from stocks and bonds

But “safe” doesn’t mean “steady.” Gold’s price can move sharply — often swinging 10–20% within months depending on market moods.

💥 2. The 2025 Gold Surge — and Sudden Pullback

According to the World Gold Council, physically-backed gold ETFs saw record inflows this year — the strongest quarter on record.
The triggers?

Expectations of rate cuts in the U.S.
A weaker dollar
Persistent inflation fears
Massive central bank buying

By mid-2025, gold prices had jumped nearly 50% from the start of the year. But on October 21, gold had its biggest one-day drop in 12 years — falling over 5%.

Why?
A wave of profit-taking and changing expectations.
Markets suddenly priced in fewer rate cuts, and investors who had ridden the rally locked in gains.

This is classic gold behavior: the same fear and greed cycles that make it a haven also make it volatile.

📊 3. Gold ETFs — The Modern Way to Hold Gold

You don’t need a vault to own gold anymore.
ETFs like SPDR Gold Shares (GLD) let you buy gold exposure directly through the stock market.

GLD is one of the largest and most liquid gold ETFs, designed to track the price of physical bullion.

When choosing a gold ETF, look out for:

Expense ratio (GLD’s is ~0.40%)
Tracking accuracy versus spot gold
Liquidity and bid-ask spreads
Tax or regional implications (especially for Singapore-based investors)

Other ETFs go beyond the metal itself — they invest in gold mining companies, which adds leverage but also higher risk (since you’re betting on both gold and company performance).

⚖️ 4. Is Now a Good Time to Buy Gold?

Here’s the balanced view:

Why you might buy now:

Rate cuts are likely in 2026
The dollar remains weak
Central bank and ETF demand is still strong
It diversifies your portfolio

Why you might hold back:

The rally’s been steep — possible 15–25% correction
Rising real interest rates can pressure gold
A stronger dollar or calmer markets could reduce its appeal
No yield — only price appreciation

My take?
If you see ongoing monetary easing, inflation, or global uncertainty, gold still makes sense as a hedge.
If you believe the economy will stabilize and markets will shift back to risk assets, it’s better to wait for a pullback.

In other words — gold is a portfolio insurance, not a get-rich trade.

💡 Final Thought

Gold’s “safe-haven” status isn’t a myth — it’s a reflection of human behavior in uncertain times.
But remember: safety has a price, and sometimes that price is short-term volatility.

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