For decades, gold has flirted with portfolio fame, serving as a hedge here and a crisis play there. However, in 2025, that flirtation has evolved into something far more serious. With prices surging nearly 50% year-to-date, hitting an all-time high of $3,800 per troy ounce, institutional capital is no longer treating gold as a sideshow.

 

Instead, it’s being recast as a strategic allocation, a standalone asset class worthy of serious portfolio weight. So, has gold finally crossed the threshold from crisis metal to core holding?

 

Gold-plated FOMO: Not just retail hype

 

The rally has been supercharged not just by geopolitical anxiety or inflation fears, but by a powerful emotional undercurrent: “gold-plated FOMO”. The fear of missing out on an asset that refuses to be ignored. As Luca Paolini of Pictet Asset Management put it, “There becomes a level when it becomes impossible not to own it.”

 

Many experts believe that the tipping point is here.

 

Behind the headlines is a profound structural shift. While central banks have been quietly hoarding gold for years, 2025 marks a wave of institutional re-rating. Pension funds, endowments, and wealth managers are actively exploring long-term allocations to gold, a trend not seen on this scale since the 1970s. Asian central banks, led by China, continue to account for the bulk of net gold purchases globally, reinforcing the region’s strategic embrace of bullion.

 

From 60/40 to 60/20/20?

 

The traditional 60/40 portfolio, comprising equities and bonds, is under scrutiny. Rising volatility in bond markets and concerns about ballooning sovereign debt have weakened confidence in fixed income as a diversifier. Enter gold.

 

Morgan Stanley now recommends a 60/20/20 allocation, assigning equal weight to gold and bonds. This isn’t just tactical hedging, it’s strategic positioning.

 

According to the World Gold Council, over $60bn has flowed into gold-backed ETFs in 2025 alone. This is an annual record, with ETF holdings now pushing 3,800 tonnes, near their Covid-era peak. These are institutional moves, not panic buys.

 

Risk, returns and relevance

 

Gold’s critics, and there are many, argue that it yields nothing, is hard to value, and lacks a productive role in the economy. Warren Buffett famously dismissed it as “neither of much use nor procreative.”

 

But today’s investors aren’t necessarily chasing income. They’re chasing optionality, resilience, and uncorrelated returns in a regime defined by political risk, deglobalisation, and monetary unpredictability.

 

In fact, gold is increasingly seen as a “tail hedge” - insurance against the unthinkable: a loss of central bank independence, runaway inflation, or systemic cracks in fiat credibility

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As one expert recently put it: “We don’t want to have [a loss of Fed independence] as our base case, but we want to have something on.”

 

So, is gold a standalone asset class now?

 

Short answer: Yes, but with caveats.

 

Gold is no longer just a fear barometer or a short-term volatility play. With multi-decade institutional memory being reshaped by low-rate fatigue and fixed income frustration, gold is stepping into a new role: strategic diversifier, not just emotional insurance.

 

It may not pay a dividend, but in a world where real yields remain fragile and tail risks are growing, for many, owning gold is starting to feel less like speculation and more like prudence.

 

Investor Warning:

 

This article is intended for informational purposes only and does not constitute investment advice. Always seek independent, professional advice before making financial decisions

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