What is Happening With Gold And Have We Forgotten The Lesson of King Midas?
The S&P500 index grew faster than gold for four years until 2025. But that was an extraordinary year for the gold price. What does this mean for your portfolio?
The Gold Rush of 2025
The S&P500 index of leading American shares grew faster than the price of gold for four years until 2025. That was a good year for US shares but an extraordinary one for the gold price which gained momentum throughout the year.
Gold prices rose by over 25% in 2025, outperforming most traditional asset classes and catching many investors by surprise.
The Myth of King Midas
King Midas was offered one wish by the gods for saving Dionysus' favourite, the satyr Silenus. The wish he chose was for everything he touched to turn to gold (his coffers were running a little low due to his lavish lifestyle).
Initially delighted, Midas soon discovered the terrible drawback when his food, drink, and even his beloved daughter turned to gold at his touch.
The lesson? Be careful what you wish for, and remember that gold, while valuable, cannot sustain life on its own.
Valuing Gold - The Challenge
The other issue with gold is how to work out its worth. As we have said before, you can work out the value of most assets with reference to its income:
| Asset Type | How We Value It |
|---|---|
| Shares | Your share of company profits |
| Bonds | Interest payments received |
| Property | Rental income generated |
| Gold | ??? |
But gold generates no income. Its value is purely based on what someone else will pay for it tomorrow. This makes it inherently speculative.
Unlike dividend-paying stocks or interest-bearing bonds, gold doesn't produce anything. You're essentially betting that someone will pay more for it in the future.
What Does This Mean For You?
If you're considering adding gold to your portfolio, think carefully about your reasons:
Are you seeking a hedge against inflation? Gold has historically performed well during inflationary periods, but it's not guaranteed.
Do you want diversification from traditional assets? Gold often moves independently of stocks and bonds, which can reduce overall portfolio volatility.
Or are you simply chasing recent performance? This is usually the worst reason to invest in anything.
A small allocation to gold (typically 5-10% of a portfolio) can make sense as part of a diversified strategy, but it shouldn't form the core of your investments.
The most successful investors focus on assets that generate real returns over time, rather than trying to time commodity markets.
The Bottom Line
Gold has a place in a well-diversified portfolio, but like King Midas learned, an obsession with gold can leave you worse off than when you started. Focus on building a balanced portfolio that includes income-generating assets, and view gold as one tool among many - not a golden ticket to riches.
Speak to an Altor adviser to discuss whether gold fits your financial plan.
Key takeaways
- Gold generated no income - its value is purely speculative based on future demand
- A 5-10% allocation to gold can provide useful diversification in a portfolio
- Don't chase recent performance - focus on your long-term investment strategy
- Like King Midas learned, an obsession with gold can leave you worse off