Gold has been a store of value for over 5,000 years. As a non-yielding asset that no central bank can print, it serves as a hedge against inflation, currency debasement, and financial instability.
What moves gold
Real interest rates (gold rises when real rates fall), US dollar strength (inverse relationship), inflation expectations, central bank buying (especially emerging markets), geopolitical risk, and ETF/jewelry demand from India and China.
Gold as a hedge
Gold typically performs well during: high inflation periods (1970s, 2020-2022), currency crises, geopolitical shocks, and falling real interest rates. It performs poorly during: strong USD periods, rising real rates, and strong economic growth with low inflation.
What it means for your finances
Many financial planners suggest 5-10% gold allocation as portfolio insurance. Options: physical gold (coins, bars), gold ETFs (GLD, IAU), gold mining stocks (higher volatility), or sovereign gold bonds. Gold doesn't pay dividends or interest, so it shouldn't be your only "safe" asset.