What was the road to outstanding investment performance in 2025? For the first time in a long time, it wasn’t Apple, Amazon or Nvidia. It was gold. Delivering its best performance in 45 years, gold rose nearly 65%. Despite these impressive gains, however, I still don’t see gold as a great investment.

Why not?

The most fundamental problem, in my view, is that gold lacks intrinsic value. Unlike traditional investments such as stocks, bonds and real estate, which produce dividends, interest and rent, respectively, gold generates no income. As a result, there is no tangible basis for determining an appropriate price—or even an appropriate price range—for gold.

Warren Buffett explained it best, when he posed this thought experiment: Suppose, he said, that you owned all the gold in the world and fashioned it into one giant cube. What would it do for you? Buffett joked that you could, “climb up on top of it…polish it…stare at it.” But that’s it. Because unlike productive assets, gold doesn’t produce anything.

That’s a problem because it makes the price of gold volatile and unpredictable. “All you are doing when you buy [gold] is that you’re hoping that somebody else a year from now, or five years from now, will pay you more to own something that, again, can’t do anything,” Buffett added.

Another key problem with gold: It’s perceived as a way to hedge against inflation, but that’s more of a perception than a reality. Gold’s reputation as an inflation hedge stems mainly from its performance during the 1970s, when inflation in the U.S. ran as high as 14%. During that decade, gold rose dramatically, from $35 an ounce in 1970 to $750 in 1980. That led many investors to conclude that gold and inflation must be linked.

But in subsequent years, gold languished. Throughout the 1980s and 1990s, gold mostly traded between $300 and $400. It wasn’t until 2007 that gold finally got back above its 1980 peak.

Gold has also disappointed investors in more recent years. In 2022, when inflation rose as high as 9%, gold didn’t do terribly well. It did rise early in the year, but when inflation later eased, gold fell. By the end of 2022, gold prices had fallen all the way back to where they’d started. In a year which saw the worst inflation in a generation, gold delivered essentially no net gains.

These are the reasons I’ve never seen gold as being a useful investment, but after last year’s rally, the risk is now even higher. And especially because gold lacks intrinsic value, there is very little supporting it, other than the confluence of five factors that happened to come together in 2025 but aren’t guaranteed to repeat.

What were those factors? First, the Federal Reserve lowered interest rates multiple times in 2025. Interest rates affect gold prices indirectly because higher rates make it relatively more attractive to own bonds or other income-generating assets. When rates fall, the opportunity cost of owning gold falls, making it relatively more attractive.

The second factor that lifted gold in 2025 was a sense of uncertainty over global events. This included Russia’s ongoing war with Ukraine as well as rising tension between the U.S. and other dictators around the world, from China to Iran to Venezuela. Because of its very long track record, gold is seen as a “safe haven” during times of uncertainty like this. It is arguably the oldest store of value still in use, and because it is easy to transport and can be converted into currency anywhere, it tends to gain in value when other assets seem more at risk.

What else drove gold in 2025? Central banks around the world have been increasing their gold reserves in recent years. When Russia first invaded Ukraine, the U.S. froze many of Russia’s financial assets. All things being equal, that made gold a more attractive holding to countries worried that they too might end up on the wrong side of future sanctions. That incremental demand has helped further boost prices.

Gold has also benefitted from what’s been called the debasement trade. This term originated in ancient times when governments would dilute their coins as a way to easily increase spending. In the short term, this strategy was effective, allowing a government to expand its budget without raising taxes. In the long term, though, it typically backfired, resulting in higher inflation. Investors are worried that the U.S. is experiencing a modern-day version of this. Even with Covid now several years in the past, federal government spending continues to outstrip revenue by nearly $2 trillion a year. The concern is that this will impact the value of U.S. Treasury bonds, and that’s led some number of investors to shift to gold as an alternative.

A final reason that gold has been rising is because it’s been rising. There is a momentum factor, in other words. As investors watched gold climb the leaderboard last year, those gains attracted other investors, which created further upward pressure on prices.

Last year, in other words, was the perfect environment for gold. The challenge, of course, is that past performance doesn’t guarantee future results. If some number of these dynamics reverse in 2026, gold’s rally could stall out.

Which way will things go? No one knows, but the good news for investors is that you shouldn’t feel compelled to invest in gold. Yes, it’s been going up, but there are many other ways to build a reasonable portfolio. And jumping into an asset after it has already logged significant gains carries significant risk.​