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Five thousand years ago, ancient Mesopotamians rolled dice to wager and communicate with the divine. Much has changed since then. We live longer, healthier lives thanks to extraordinary technological progress. But one thing hasn’t budged: the human urge to bet on uncertain outcomes.
Today, gambling is more accessible than at any point in history. From your phone or laptop, you can speculate on everything from stock prices to sports scores to political elections without leaving your couch. The result is a full-blown betting boom.
As gambling has gone mainstream, the line between investing and speculating has blurred. On the surface, both involve risking money in pursuit of a return. But the similarities end there.
Investing gives you ownership in assets that can generate economic value over time. Through stocks and bonds, investors either own small stakes in businesses or lend money to governments and companies that pay interest. In a business, investors have a legal claim on future earnings, residual claims on assets, voting rights, and profits. Those earnings may be reinvested by the business or distributed as dividends or share repurchases.
Index investing spreads exposure across many firms or sectors, aiming to capture broad economic growth rather than the fate of a single company.
Gambling, by contrast, is largely a transfer of wealth from losers to winners, a cost paid in exchange for excitement. Most bets are binary: you’re either right or wrong. Investing, on the other hand, unfolds across a range of outcomes, better described as a probability tree than a coin flip.
History reflects this divide. Since 1990, the broad U.S. stock market has returned about 10% annually on average, as measured by the S&P 500. Meanwhile, a study of more than 700,000 gamblers found that 96% lost money over time.1
One of the clearest examples of this grey area is the surge in zero-days-to-expiration (0DTE) options. Options are contracts that allow investors to buy or sell an underlying security at a specific price by a certain date. Traditionally, these were tools used by professionals for hedging risk.
0DTE options change the equation. They allow traders to place highly leveraged bets on where an asset will land by the end of a single trading day. With a relatively small amount of money, speculators can make outsized wagers on short-term market moves.
Fueled by social media, aggressive marketing campaigns from certain brokers, and the expansion of daily option expirations, retail investors have piled in. Today, 0DTE options account for more than 50% of all SPX (the S&P 500 index) option volume, with retail traders responsible for roughly half of that activity.2 In 2025, average daily SPX option volume reached 3.9 million contracts, representing over $1 trillion in notional value.3
These instruments aren’t limited to major indexes. They are now widely available on individual stocks and exchange traded funds (ETFs), offering endless opportunities for high-risk speculation.
Chart Source: Cboe.com
Speculation has also increased alongside greater use of leverage. Margin debt allows investors to borrow money to amplify their bets. For example, an investor with $100 could control $200 of securities using 2x leverage. Across U.S. margin accounts, leverage has risen sharply over the past decade, exceeding 3x for the first time in late 2025. This also works in reverse. If the investment declines by 10%, the leveraged investor would experience a 20% loss on their original capital, excluding interest and fees.
Another fast-growing path to leverage comes from leveraged ETFs, which aim to deliver two to five times the daily return of an index or individual stock. By October of last year, roughly 200 new leveraged equity ETFs had launched, bringing the total to more than 700.4 Because of daily rebalancing and volatility, returns over multiple days can differ significantly from the underlying index and may even underperform.5
Chart Source: FINRA.org
In 2018, the U.S. Supreme Court struck down a federal ban on state-sponsored sports betting. What was once largely underground moved into the mainstream almost overnight. States rushed to legalize the activity, and betting volumes exploded.
Legal sports wagers totaled $6.6 billion in 2018.6 By 2024, that figure exceeded $148 billion, with early estimates putting 2025 volume between $160 and $170 billion.7
Like roulette, sportsbooks operate with a built-in edge. In roulette, the two green slots give the house a 5.26% advantage over time. In sports betting, the edge comes from the spread between favorites and underdogs. If the favorite on one side has odds of -200 (meaning you need to bet $200 to win $100) and the underdog’s odds on the other are +150 (meaning you need to bet $100 to win $150), it creates a 6.25% house edge across a large number of bets.What’s more troubling is how bettors perceive these platforms. A 2024 study found that 31% of sport bettors viewed gambling as an investment, and 65% said they were betting to make extra money.8 This belief runs directly counter to how sportsbooks operate. DraftKings CEO Jason Robins has been blunt on the topic: “This is an entertainment activity. People who are doing this for profit are not the players we want.”9
In practice, the incentives run the other way. Platforms actively manage risk by limiting or restricting winning players, while allowing losing players to continue betting — an approach that closely mirrors casino economics.
Prediction markets add another twist. These platforms allow users to wager on real-world outcomes like elections, court rulings, or award shows. Unlike sportsbooks, prediction markets are regulated as derivatives exchanges by the Commodity Futures Trading Commission (CFTC), not state gaming authorities. This distinction has allowed platforms like Kalshi and Polymarket to operate nationwide.
Unlike sportsbooks, prediction markets operate as peer-to-peer exchanges rather than setting odds against bettors. Estimates of their size vary, but most point to rapid growth. One research report suggested $28 billion in prediction-market trading volume in 2025, more than four times the prior year.10
Supporters argue these markets provide real-time insights and useful hedging tools. Critics warn of weak regulation, susceptibility to manipulation, and the inherently speculative nature of many contracts.
The desire to wager is deeply human. We crave excitement, instant gratification, and validation of being right. But today’s tools of instant access, extreme leverage, and constant stimulation have supercharged those impulses. Whether in markets, sports, or politics, speculation is booming. And in an environment where bets can be placed in seconds and leverage is just a tap away, discipline matters more than ever.
One simple rule still holds: If it feels thrilling, it’s probably not investing.
Sources:
[1] University of California San Diego Rady School of Management. (June 18, 2024). "Online Gambling Policy Effects on Tax Revenue and Irresponsible Gambling." https://drive.google.com/file/d/1o5epbZYxEtdJ2gmOH1vHdxihrmhNBe__/view
[2] Cboe Macro Volatility Digest. (June 2, 2025). "SPX 0DTE Options Jump to 61% Share on Retail Resurgence." https://go.cboe.com/l/77532/2025-06-02/fmtxvz/77532/1748867849rr7COnLC/Macro_Volatility_Digest_2025Jun2.pdf
[3] Cboe News. (January 6, 2026). "Cboe Global Markets Reports Trading Volume for December and Full Year 2025." https://ir.cboe.com/news/news-details/2026/Cboe-Global-Markets-Reports-Trading-Volume-for-December-and-Full-Year-2025/default.aspx
[4] The Wall Street Journal. (October 23, 2025). "Popular Leveraged Funds Shock Investors With Huge Losses." https://www.wsj.com/finance/investing/popular-leveraged-funds-shock-investors-with-huge-losses
[5] One Day In July. (January 2025). "Quarterly Booklet Winter 2025, Issue XXX." https://media.onedayinjuly.com/media/pdf/2025_Winter_Quarterly_Booklet_DIGITAL_V.pdf
[6] Sportsbook Review. (January 30, 2026). "U.S. Sports Betting Revenue and Handle: Tracking Betting Market Data 2026." https://www.sportsbookreview.com/news/us-betting-revenue-tracker/
[7] TrafficGuard. (December 5, 2025). "The State of the U.S. Sports Betting Market in 2026." https://www.trafficguard.ai/blog/the-state-of-us-sports-betting
[8] NerdWallet. (January 28, 2025). "2025 Sports Betting and Gambling Survey." https://www.nerdwallet.com/investing/studies/2025-sports-betting-and-gambling-survey
[9] Rolling Stone. (November 17, 2024). "Is the $11 Billion Sportsbook Bubble About to Burst." https://www.rollingstone.com/culture/culture-sports/sports-betting-law-draftkings-fanduel-1235158334/
[10] The Block. (December 2025). "2026 Digital Assets Outlook." https://www.tbstat.com/wp/uploads/2025/12/20251213_EOY_Report-2.pdf
The U.S. economy finished 2025 on solid footing. As of December 31st, the Atlanta Fed’s GDP Now model reported roughly 2.7% growth in the fourth quarter, supported by strong consumer spending and rising private inventories.1 Healthy consumer demand remains a hallmark of steady expansion, while inventory investment tends to be more mercurial. Fourth-quarter growth followed solid expansions in Q2 and Q3, after a policy-driven contraction in Q1 caused largely by a surge in imports ahead of tariff enactments.
The labor market cooled meaningfully over the course of the year. Unemployment rose from 4.0% in January to 4.4% in December, while job creation slowed sharply.2 Over the past three Nonfarm Payroll reports, job losses averaged approximately 22,000 per month.3 Federal Reserve Chair Jerome Powell has also raised concerns that current payroll methodology may be overstating job creation by as much as 60,000 jobs per month.4 If accurate, the U.S. economy may continue experiencing net job losses as it enters 2026.
Productivity, defined as output per hour worked, is a key driver of economic growth, corporate profitability, and living standards. It also influences wage growth and tends to be deflationary, putting downward pressure on prices. Productivity growth has been uneven over the past century, alternating between periods of strong gains and relative stagnation. With immigration slowing, future GDP growth will depend more heavily on productivity improvements, making this an increasingly important metric to monitor. Any drag from a slower-growing labor force will need to be offset by technological adoption and innovation.
Data from the Bureau of Labor Statistics indicate that productivity gains in 2025 were solid but remain below long-term historical averages. Since 2019, productivity has grown at an average annual rate of 2.0%, slightly below the 2.1% U.S. average since 1947.5 Although this suggests some improvement relative to the post-pandemic period, productivity growth has not yet returned to its long-run trend. A notable exception occurred in the third quarter of 2025, when productivity rose at a 4.9% annualized pace. Subsequent data will be critical in determining whether this acceleration represents a sustained shift or a temporary rebound.3
The disinflationary trend that began after 2022 slowed during 2025, though the most recent Consumer Price Index (CPI) report offered some relief.6 The November CPI showed headline inflation rising 2.7% year over year, cooler than expected and closer to the Federal Reserve’s long-run 2.0% target. Core inflation declined to 2.6% year over year, while shelter inflation, a heavily weighted component, eased to 3.0%. The Zillow Rent index, an alternative measure of housing inflation, also showed cooling, reinforcing the disinflation narrative.7
The CPI report was not without controversy. Following a government shutdown that delayed the prior release, month-over-month data were unavailable, and the Bureau of Labor Statistics acknowledged data gaps. As a result, many economists interpreted the report cautiously. Even so, the moderation in inflation remains encouraging. Overall, the U.S. economy is entering 2026 with solid momentum but lingering structural questions. Investors and policymakers alike will be watching whether growth can be sustained through stronger productivity gains and continued progress on inflation.| Major Equity Indexes | ||||||
|---|---|---|---|---|---|---|
| S&P 500 (Large Cap) |
Nasdaq-100 (Large Cap) |
Dow Jones (Large Cap) |
Russell 2000 (Small Cap) |
MSCI EAFE (Developed Markets) |
MSCI EM (Emerging Markets) |
|
| 12/31/25 | 6,845.50 | 25,249.85 | 48,063.29 | 2,481.91 | 10,604.80 | 766.52 |
| Q4 2025 | 2.3% | 2.3% | 3.6% | 1.9% | 4.9% | 4.7% |
| FY 2025 | 16.4% | 20.2% | 13.0% | 11.3% | 31.2% | 33.6% |
Data source: Yahoo Finance U.S. Markets and MSCI Emerging Markets
Global equities capped off a strong fourth quarter and an exceptional year in 2025. All major equity indexes finished higher, with international markets outperforming U.S. stocks. After the volatility sparked by the Administration’s April “Liberation Day” announcement, markets rebounded swiftly and pushed to new all-time highs.8 Gains were supported by improving trade dynamics, ongoing economic expansion, solid earnings growth, rising forward earnings expectations, and valuations expansion as investors paid higher multiples for future earnings.
While early-year gains were heavily concentrated in large-cap stocks, particularly the “Magnificent 7” highly influential U.S. tech stocks, market leadership broadened meaningfully in Q4. Value-oriented large-cap stocks outperformed, signaling healthier participation across the equity market. Looking ahead, small-cap earnings growth is expected to accelerate in 2026, driven by the economic momentum, multiple expansion, and a more accommodative interest-rate environment. With greater exposure to short-term and floating-rate debt, small-cap companies stand to benefit disproportionately if the Federal Reserve continues easing.
International equities led performance in 2025, driven by stronger earnings trends, expanding valuations, and a weaker U.S. dollar, which accounted for roughly one-third of international equity gains. However, questions remain about the durability of this rally, particularly in developed markets such as the Eurozone, where sluggish productivity growth and demographic challenges may limit longer-term upside.9
Data source: U.S. Department of The Treasury
The yield curve shows interest rates across U.S. Treasurys, including bills (0-1 year), notes (1-10 years), and bonds (10+ years). Because Treasury yields underpin most borrowing costs in the U.S., even small changes can have broad economic effects. Mortgage rates, auto loans, and credit cards are all heavily impacted by moves in the Treasury market. Mortgage rates are heavily influenced by the 10-year Treasury, auto loans the 5-year, and credit cards the ultra-short end of the curve.
Since the start of 2025, yields across most maturities have declined, with some stabilization in Q4. Short-term rates, driven by Federal Reserve policy, have fallen roughly 70 basis points (0.70%). The middle of the curve has also moved lower, with the 2-year and 5-year yields down 78 and 65 basis points, respectively. The long end has seen far less movement, with the 10-year and 20-year dropping only 40 and 7 basis points, while the 30-year bond has risen 6 basis points.
Muted movement at the long end has raised questions about whether U.S. fiscal concerns are weighing on the bond market. In most rate-cutting cycles, longer-term yields fall alongside short-term rates.10 However, those cycles typically coincide with economic unrest. In the current environment of steady economic growth, falling short-term rates are instead supporting a normalization of the yield curve. While the U.S. fiscal trajectory remains unsustainable, there are no clear signs of stress in the Treasury market today.
Corporate spreads represent the yield difference between corporate bonds and comparable U.S. Treasurys of the same maturity. These spreads compensate investors for default risk and the potential loss in the event of default. Throughout 2025, spreads for both high-quality and lower-quality corporate bonds remained very tight. Excluding a brief bout of volatility in April, spreads have remained well below their 10-year averages.
The tightness of credit spreads reflects both fundamental and technical factors. From a fundamental perspective, solid economic growth and strong earnings prospects for U.S. firms have reduced perceived default risk, compressing spreads. In addition, many lower-quality issuers continue to access private credit markets, improving the overall quality of the public bond market. On the technical side, limited corporate bond issuance ahead of the most recent rate-cutting cycle, combined with strong investor demand, has pushed prices higher and yields lower. As a result, current spreads offer limited compensation for default risk.
Data source: Federal Reserve Bank of St. Louis
| Major Currency Indexes | ||||||
|---|---|---|---|---|---|---|
| U.S. Dollar | Euro | British Pound | Japanese Yen | Canadian Dollar | Bitcoin | |
| 12/31/25 | 98.28 | 117.46 | 134.74 | 63.86 | 72.99 | 87,508.83 |
| Q4 2025 | 0.5% | 0.1% | 0.2% | -5.6% | 1.6% | -23.5% |
| FY 2025 | -9.4% | 13.4% | 7.7% | 0.5% | 5.0% | -5.3% |
Data source: Yahoo Finance U.S. Markets
Currency markets were volatile in the first three quarters of 2025. The U.S. dollar declined more than 10% during that period before staging a modest rebound in Q4. The weakness reflected Federal Reserve rate cuts, fiscal policy uncertainty, and shifting growth expectations for the U.S. economy. International central banks also contributed, as increased purchases of gold, an alternative reserve asset, reduced support for the dollar.
The euro and British pound rose sharply in 2025, benefiting from U.S. dollar weakness. Additional support came from increased fiscal stimulus and improving economic outlook. As governments stimulate their economies, capital tends to flow into those currencies, pushing valuations higher. Such moves can overshoot during periods of optimism and often lead to partial reversals in subsequent years.11
The Japanese yen experienced a mid-year decline exceeding 10% before recovering to finish near its starting level for 2025.12 The weakness stemmed from wide interest rate differentials between Japan and other developed economies. When a country’s interest rates are low, its bonds become less attractive, often resulting in capital outflows and currency depreciation.
Bitcoin struggled in Q4, falling nearly 24% and ending the year down 5.3%.13 To function as a true currency, an asset must serve as a unit of exchange, a store of value, and a unit of account. While bitcoin’s use as a medium of exchange has increased, its volatility limits its effectiveness as a store of value, and its adoption as a unit of account remains minimal. Nonetheless, the cryptocurrency’s growing prominence justifies its inclusion here, even if it does not meet the traditional definition of a currency.
| Major Metals: Price Per Ounce | |||||
|---|---|---|---|---|---|
| Gold | Silver | Platinum | Palladium | Copper | |
| 12/31/25 | $4,345.80 | $72.17 | $2,029.10 | $1,636.20 | $0.35 |
| Q4 2025 | 12.45% | 54.31% | 28.38% | 26.75% | 17.01% |
| FY2025 | 64.57% | 148.60% | 120.63% | 72.23% | 41.71% |
Data source: AMPEX Precious Metals Dealer
2025 was a standout year for precious metals. The asset class outperformed stocks, bonds, and real estate, posting gains well in excess of 50%. Momentum carried into the fourth quarter, with metals continuing to rally. Silver led the group, rising more than 54% in Q4 alone.
Gold, supported primarily by demand from central banks, investors, and jewelry fabrication, gained 12.45% in the fourth quarter and finished the year above $4,300 per ounce. Only a handful of periods over the past 40 years have seen gold appreciate this rapidly, and forward returns following such episodes have historically been muted. Periods of euphoria tend to pull demand forward, often resulting in weaker performance in subsequent years. As highlighted in our previous newsletter, there have been 10 instances since 1986 when gold rose more than 100% over a three-year period.14 In those cases, gold’s average annual return over the following decade was just 2.65%.
Industrial metals such as copper and palladium also posted strong gains in 2025. As global electrification accelerates and data center construction expands rapidly, demand for metals with high electrical conductivity has increased meaningfully. While this structural demand supports a favorable longer-term outlook, industrial metals remain susceptible to volatility. Copper prices surged more than 10% in early July following a tariff announcement by the Administration, then fell as much as 25% by month-end after clarification that refined copper would be excluded from the tariffs. The July episode underscores the elevated volatility in metals markets today.15
Sources:
1. Federal Reserve Bank of Atlanta. (Accessed January 5, 2026). GDPNow. https://www.atlantafed.org/cqer/research/gdpnow
2. One Day In July. (Fall 2025). Quarterly Booklet Issue XXXIII. https://media.onedayinjuly.com/media/pdf/Fall_2025_Quarterly_Booklet_Digital.pdf
3. United States Department of Labor - Bureau of Statistics. (Accessed January 8, 2026). Productivity and Costs, Third Quarter 2025. https://www.bls.gov/news.release/pdf/prod2.pdf
4. The Wall Street Journal. (December 10, 2025). Fed Chair Jerome Powell Says U.S. May Be Drastically Overstating Jobs Numbers. https://www.wsj.com/economy/jobs/fed-chair-jerome-powell-says-u-s-may-be-drastically-overstating-jobs-numbers-741c635d?gaa
5. United States Department of Labor - Bureau of Statistics. (September 4, 2025). Productivity Change in the Nonfarm Business Sector, 1947 Q1 – 2025 Q2. https://www.bls.gov/productivity/images/pfei.png
6. United States Department of Labor - Bureau of Statistics. (Accessed December 30, 2025). Consumer Price Index. https://www.bls.gov/cpi/
7. Zillow. (December 18, 2025). Rents Pull Back and Concessions Rise, Offering Renters Winter Leverage. https://www.zillow.com/research/november-2025-rent-report-35870/
8. Center for Strategic and International Studies. (April 3, 2025). “Liberation Day” Tariffs Explained. https://www.csis.org/analysis/liberation-day-tariffs-explained
9. One Day In July. (Summer 2025). Quarterly Booklet Issue XXXII. https://media.onedayinjuly.com/media/pdf/Summer_2025_Quarterly_Booklet_DIGITAL.pdf
10. Charles Schwab. (December 3, 2025). 2026 Outlook: Treasury Bonds and Fixed Income. https://www.schwab.com/learn/story/fixed-income-outlook
11. International Monetary Fund. (2020). IMF Advice on Capital Flows: Evaluation Report. https://ieo.imf.org/en/-/media/ieo/files/evaluations/completed/09-30-2020-imf-advice-on-capital-flows/cfm-2-context-final.pdf
12. Yahoo Finance. (Accessed December 30, 2025). Japanese Yen Currency Index. https://finance.yahoo.com/quote/%5EXDN/
13. Yahoo Finance. (December 31, 2025). Bitcoins Ends Year Marred By Disappointment – But a Bounce Could be in the Cards for January. https://finance.yahoo.com/news/bitcoin-ends-a-year-marred-by-disappointment--but-a-bounce-could-be-in-the-cards-for-january-211730762.html
14. One Day In July. (December 9, 2025). Gold Rush 2025. https://www.onedayinjuly.com/research-gold-rush-2025
15. CNN. (July 17, 2025). Copper Prices Have Surged to Record Highs – and They Could Jump Higher. Here’s Why. https://www.cnn.com/2025/07/17/investing/copper-prices-us-market-tariffs
Mount Erebus in Antarctica stands out for several extraordinary features: it is the southernmost active volcano, it hosts more than 100 ice fumaroles, and it releases roughly 80 grams of gold vapor into the atmosphere each day. While the idea of harvesting gold from a volcano’s plume is more fantasy than feasible, the anecdote underscores a broader reality - in a world where gold’s value is surging, investors are searching for every possible source of the metal. That search has become far more urgent in 2025, as gold prices have accelerated sharply and global demand has reached multi-year highs.
2025 has been memorable for investors in precious metals. Silver surpassed its all-time high set in 2011, and gold delivered a staggering 60.52% return since the start of the year.1 This remarkable rally is driven by a variety of factors, including geopolitical uncertainty, a weaker U.S. dollar, and central bank and investor demand. The rally has left many investors rethinking gold’s value and its potential place in a portfolio.
The gold supply comes from two sources: mined gold and recycled gold. Recycled gold (melted down and reused) made up about 26% of global supply in 2025, with the remaining 74% produced by mines.2 A tonne of gold is a metric ton (1,000 kilograms), the standard unit in the precious metals market. Leading producers include China (380 tonnes), Russia (330 tonnes), Australia (284 tonnes), Canada (202 tonnes), and the U.S. (158 tonnes).3
To help visualize global gold supply, it’s useful to note that all the gold ever mined would form a cube only 22 × 22 × 22 meters. The entire world’s above-ground gold could fit inside a single building-sized cube, roughly the height of a seven-story structure.4 The small volume often surprises people and underscores gold’s enduring scarcity.
Current estimates suggest that humanity has mined approximately 216,265 tonnes of gold to date. Below the surface, an estimated 132,000 tonnes of gold resources remain.5 Of that total, about 55,000 tonnes are classified as reserves, which means gold that can be economically extracted at today’s prices. As prices rise, some portion of the remaining resources becomes profitable to mine and shifts into the reserve category. In addition to these long-term estimates, global mines produced roughly 2,700 tonnes of new gold in the first three quarters of 2025 alone.
Chart Sources: ICE Benchmark Administration, Metals Focus, World Gold Council
*Data as of 30 September 2025.
While gold supply shifts with price and extraction economics, demand is equally varied. Technology accounts for about 6% of global demand, where gold’s conductivity and corrosion resistance make it useful in components such as circuit boards and microchips.6 In healthcare, gold remains important in applications ranging from dental work to diagnostic tests. Jewelry is still the most enduring source of demand, representing roughly 32% of global purchases as of Q3 2025. The recent surge in gold prices, however, has been driven far more by central banks and investors.
Central bank demand has risen sharply since 2022 as policymakers sought reserve assets that diversify away from the U.S. dollar and avoid counterparty risk, meaning gold’s value does not depend on another institution’s ability to meet its obligations. Periods of high inflation and low or negative real interest rates make holding gold more attractive, since the opportunity cost of owning a non-yielding asset declines. In 2020, central banks bought 254.95 tonnes of gold, and over the last four quarters that figure has nearly quadrupled to 998.64 tonnes, representing almost 17% of global demand in Q3.7
Investors have added to the momentum. Much of the increase reflects the “debasement trade,” a bet on a weaker U.S. dollar boosting dollar-denominated assets like gold. While demand for physical bars and coins has risen, a large share of 2025’s rally comes from inflows into gold exchange-traded funds (ETFs). ETF demand is up 134% from the same period last year, and by September more than 40% of total gold demand came from investors through coins, bars, and ETFs.8
Most investors purchase gold for three primary reasons: potential returns, diversification, and inflation protection. Starting with returns, gold has delivered a compound annual growth rate of 6.15% over the past 40 years.8 While that figure is far from insignificant, it does trail U.S. equities by a wide margin. What’s more concerning today is the magnitude of gold’s three-year, 120% surge. Over those same four decades, there have been 10 instances in which gold climbed more than 100% over a three-year period. In each of those cases, the following decade produced an average annual return of just 2.65%. If this history is any guide, the forward-looking return for gold may fall well below its long-term average.
Chart Source: www.ETFreplay.com
While the recent rally is impressive, investors should consider how gold behaves relative to equities and its potential role in a diversified portfolio. Correlations between gold and equities have varied greatly. Over the past decade, the 20-day correlation between the S&P 500 and gold has swung from +0.76 to –0.81.10 A correlation of +0.76 means gold tended to rise when stocks rose, offering little diversification; a correlation of –0.81 means gold often moved in the opposite direction, providing strong diversification. Although the correlation generally remains below 1, there are long stretches when gold does not offset equity movements to the degree investors might expect.
Inflation protection is one of the strongest reasons investors buy gold. Because gold is priced in U.S. dollars, a weaker dollar usually lifts its value and makes it a useful inflation hedge. What is considered less often is the opposite scenario: a deflationary period in which the dollar strengthens. A stronger dollar raises the “denominator” of the gold price and can push gold lower just when investors expect it to rise. Deflation typically appears during downturns. In these periods, gold can fall alongside stocks. In 2008, gold dropped more than 25% before recovering, and in the early 2020 sell-off it also declined as investors raised cash.11 While inflation has dominated recent discussion, the risk of deflation, and the chance that gold could move down alongside equities, should not be overlooked.
In many ways, the frenzy surrounding gold in 2025 mirrors the allure of Mount Erebus itself. Gold captures attention because it is tangible, scarce, and steeped in history, yet it is important to remember what it is not. Gold does not produce earnings, pay dividends, or generate cash flow the way a business does. With limited exceptions, it only creates value for an investor when it is sold, which means its return depends entirely on someone else being willing to pay a higher price in the future. That does not make gold useless, but it does mean it functions very differently from productive assets. It serves as a reminder that while the pursuit of gold can spark imagination, sound investing requires careful footing. The Gold Rush 2025 may feel volcanic in scale, but navigating it wisely will matter far more than chasing every glimmer.
Sources:
[1,11] APMEX. “Gold Price.” www.apmex.com/gold-price
[2,6,7,8] World Gold Council. “Gold Demand Trends Q3 2025.” www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q3-2025
[3] World Gold Council. “Gold Production by Country.” www.gold.org/goldhub/data/gold-production-by-country
[4,5] World Gold Council. “How Much Gold.” www.gold.org/goldhub/data/how-much-gold
[9] Macrotrends LLC. “Historical Gold Prices: 100-Year Chart.” www.macrotrends.net/1333/historical-gold-prices-100-year-chart
[10] ETFreplay.com. “Correlation Tool.” www.etfreplay.com/correlation
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