To determine why it is not too late to buy gold, we must consider why many people might be inclined to think that it is too late.
First, gold has experienced an explosive bull run, as can be seen in the chart below. After remaining virtually flat for the first three and a half years of the 2020s, with strong resistance at $2,000/oz, it shot up to higher ground and has not stopped rising since. In March 2023, the price of gold was around $1,900 per troy ounce. By March 2025, it had risen to around $3,038, representing a 60% increase. It is even higher now ($3,125). Gold significantly outperformed both the S&P 500 (+41%) and the NASDAQ (+49%) during that same two-year period.
And it has been reaching ever higher highs. Anyone would think that the bull must be on the verge of exhaustion.
But not so fast...
When looking at the appreciation of gold (or any other asset), what you always see is the gain in nominal terms. However, the correct way to view it is in inflation-adjusted terms. Let me illustrate: what is the current purchasing power of the asset—in US dollars, assuming that is your currency—compared to what it was when you acquired it? This is the true measure of something's value. Because inflation is a currency killer.
We haven't had zero annual inflation since the 19th century, and the last 50 years have been particularly brutal. The dollar has fallen 88% since 1971 (not coincidentally, the year President Nixon ended the dollar's convertibility into gold).
Now let's look at gold—also known as real money—from this perspective. In early 1980, its price peaked at $850 per ounce. While it has far surpassed that benchmark in the meantime, it has never done so adjusted for inflation. What you could buy with $850 in 1980 would require a whopping $3,291.50 today.
In other words, despite its rise, gold is still cheaper than it was 45 years ago! If you had kept dollar bills under your mattress in 1980, each one would now be worth about 12 cents. But the gold coins you would have kept would not have lost any purchasing power. None.
Gold is, and always has been, the best protection against inflation. Currencies devalue and often lose their value. Gold never has.
Below are five factors driving the current demand for gold and, therefore, its price:
1. Geopolitical drama: Wars, political changes, and global instability. Chaos is gold's love language.
2. Dollar weakness/inflation: As noted, the two are intertwined. Challenges to the US dollar's position as the global reserve currency are also looming.
3. Stagnant supply: In 2023, approximately 3,100 metric tons of gold were mined worldwide, a figure that has remained unchanged since 2014. It is generally accepted that most of the huge deposits have already been discovered, and new major discoveries are rare. As the economic extraction of the metal becomes increasingly difficult, gold becomes scarcer.
4. Money printing: The world's central banks continue to create new currency units as if they were M&Ms.
5. Central banks are buying.
This last point is key and worth delving into, as central bank demand has been the main driver of gold's rapid rise in recent years. This represents a radical change from 30 years ago.
Between 1995 and 2009, central banks were net sellers of gold, reducing their reserves. We can infer that they believed gold was no longer relevant. In 2010, they became moderate net buyers, with average annual purchases of 473 tons (i.e., metric tons) through 2021. Then, for some reason, they experienced a significant change in attitude and engaged in large-scale buying.
In 2022, according to the World Gold Council, central banks made record net purchases of 1,082 tons, more than double the average for the previous decade. In 2023, the figure was 1,037 tons, and last year it was 1,045 tons, the third consecutive year in which 1,000 tons were exceeded.
One metric ton = 32,150 troy ounces, so we're talking about a LOT of gold.
Furthermore, the published figures could be an underestimate, due to the opacity of the Chinese market. The People's Bank of China (PBoC) officially reported the purchase of only 44 tons of gold during 2024, despite a six-month hiatus between May and October. However, China is the world's largest mining producer, accounting for approximately 10% of global production. This represented a production of about 370 tons throughout the year, and all of that amount remained somewhere in the country. The amount absorbed by the PBoC remains a mystery.
The curious reality is that while central banks have been driving the price of gold up, there has not yet been much market participation by institutions and the general public. Jewelry sales have declined. Individual investors seem to be, to a large extent, in a state of FOJI (fear of joining in), afraid of being late to the party.
That will change, and when it does, FOMO (fear of missing out) will replace FOJI (fear of joining social media or digital groups for fear of not knowing what to post or not receiving the expected validation in the form of likes and comments), and bulls will likely stampede.
That said, it is not wise to treat gold as a speculative investment. It is something to buy and hold, your insurance policy against the devaluation of the entries in the electronic ledger that now represent dollars. Is it too late to add gold to your assets? No. It never is.
As a footnote, let me add that you shouldn't be scared by the recent tariff-induced price drop. Historically, this always happens when there is a stock market crash. Traders who are short on their positions need to get cash quickly to cover their losses. This is normal. And gold has always recovered faster than stocks. If the drop seems big to you right now, check out the 2-year chart to see that it's just a blip. You can wait for the dust to settle if you want, but pullbacks are an invitation.
And if you're also looking for profitable investments in the gold market, consider the companies that mine it. Most have not yet joined the metal's upward trend, and many are dirt cheap, as Jeff has pointed out. Historically, mining company stocks always lag behind physical gold, but over time, they always peak. When they do, their returns are often many multiples of a greater appreciation in the price of gold.
Jeff Clark, Money Metals