Investors Ditch Bonds for Gold

Gold has reclaimed its status as the market’s ultimate safe haven in 2025, with prices smashing through $3,600 an ounce, delivering nearly 40% gains year-to-date, the best run for the precious metal since as far back as 1978. 

On the other hand, traditional safe assets like bonds are faltering, undermined by persistent inflation and political risk. European government bonds have shed around 20% of their value since 2020, while US long-duration Treasuries have halved. 

Even in 2025, European benchmarks are down another 2%, leaving the classic 60/40 portfolio lagging. Over the past five years, this mix has returned just 32%, compared with a 109% surge in the S&P 500.

The breakdown in the equity-bond correlation has echoes of the 1970s, when inflation surged and central bank credibility wavered. In similar fashion, both stocks and bonds slumped during April’s post-Liberation Day selloff, while gold held firm. 

What Does This Mean for Me?

Central banks, particularly in China, India and Turkey, are accelerating diversification away from the dollar, with IMF data showing gold purchases have risen fivefold since 2022. Investors are following their lead with SPDR Gold Shares pulling in $11.3 billion this year, close to a record.

High debt levels and fears of financial repression mean real bond yields could stay negative for years. Political uncertainty is making the problem worse: Donald Trump’s attacks on Fed Chair Jerome Powell have raised concerns about the central bank’s independence, weakening faith in its inflation-fighting mandate.