Given the recent bout of geopolitical uncertainty, gold – long regarded by many investors as a safe haven asset – has had a strong run. However, as tensions have started to ease (at least for the moment), some have begun to question whether the commodity can still play a role in a diversified portfolio. We believe the answer is yes.
Why we turned to gold in 2019
At Orbis, we built up the gold exposure in our multi-asset portfolios in 2019. This change was driven by increasing concerns about deficit and debt levels in the US and developed world. Governments were spending far too much money, which in our view put their currencies at risk. The US alone is currently over $36 trillion in debt – the highest national debt in the world – and President Trump’s “big, beautiful bill” threatens to add another $3 trillion to that figure.[1]
The market’s reaction has been swift, with the US dollar suffering its worst first-half performance since 1973.[2] Rising debt erodes confidence that a government can repay without resorting to money printing or inflation, so investors demand more compensation or sell the currency, driving its value down.
Gold, however, can be considered a 9,000-year-old currency that’s never been devalued, never gone broke. From that perspective, it is the world’s most enduring store of value, especially when the US dollar (or any fiat currency) looks expensive relative to fundamentals.
Supply is predictable; demand is the wild card
From an investors point of view, there are two ways to look at gold. One is strictly as a commodity, so supply and demand. Recently, demand has been outstripping supply, so the price has been going up. We know roughly what the supply of gold is going to be each year, although that is declining over time because the metal is getting harder to find.
Demand, by contrast, is far less predictable. In recent years it has been propelled mainly by aggressive central-bank purchases and steady buying from China and India. However, demand from Western markets has been relatively subdued, as their focus has been more on AI and big tech, the areas where momentum has been strong over the last few years.
But, when that momentum rolls over and fades out, the retail investors of the world will likely try and shift into where there’s still momentum and that includes gold. Evidence is emerging to support this thesis: gold ETFs saw net inflows in the first half of this year after 18 straight months of outflows, driven largely by U.S. investors.[3] That renewed interest is spilling over from bullion to the often-overlooked gold-mining equities. Because central banks buy the metal, not the miners, the latter remain mispriced and overlooked, offering a fertile hunting ground.
Rotating from bullion into miners – without abandoning the hedge
As bullion climbed, gold-mining shares lagged, so we’ve gradually been trimming our direct gold exposure and shifting that capital into miners. This year, that lag has flipped and the miners have started outpacing the commodity for the first time in a long time. So every time gold hits a new level we’ve been top slicing the commodity weighting and recycling it into either gold miners, or other areas we find interesting such as inflation protected bonds.
That said, it doesn’t mean we think that gold's rolling over and going down. We're just being conscious of risk – the higher something goes, the more risk there is that it will fall sharply.
In theory gold can continue to go higher, especially if major currencies such as the US dollar devalue. If macro, geopolitical or regional events cause fiat currencies or paper currencies to fall, then gold could rise as a so-called “safe haven”. In our view, we think some currencies will go down relative to gold, because governments are still spending too much money – deficits are too high and debt levels are going up and up and up. That makes paper currencies worth less against all material items, of which gold is the best representation.
With that in mind, gold should in our view go up over time, and we think it still has a decent place in a diversified portfolio. And while we have been trimming it in favour of inflation protected bonds, we still hold a significant position in the Orbis multi-asset portfolios.
[1] Source: https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny
[2] Source: https://www.theguardian.com/business/2025/jun/30/us-dollar-first-half-trump-tariffs#:~:text=Investors%20have%20been%20selling%20the,US%20national%20debt%20even%20higher.
[3] Source: https://www.reuters.com/markets/commodities/gold-etfs-drew-largest-inflow-three-years-q1-says-wgc-2025-04-08/
Werner (Vern) du Preez is an Investment Specialist at Orbis Investments, a sponsor of Firstlinks. This article is for general informational purposes only and does not constitute financial, investment, or other professional advice. The content is not tailored to the specific investment objectives, financial situation, or needs of any individual. Investors should not rely solely on this information in making investment decisions. We do not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. This information is at a point in time and the Orbis Funds may take a different view depending on changing facts and circumstances. The value of investments in the Orbis Funds may fall as well as rise and you may get back less than you originally invested.
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