This past Wednesday, the “spot” price for gold closed above $4,000/troy ounce for the first time ever. By this measure alone, the shiny stuff is as expensive as it has ever been. At the end of last year, it was only $2,624.50/troy ounce.
Obviously, that is quite a move in a relatively short period of time. But what is behind it? Why have investors been flocking to gold in 2025?
After all, the stuff doesn’t change.
After all, it doesn’t pay a dividend or interest.
An ingot doesn’t generate revenue or turn a profit. I have yet to hear an American Golden Eagle coin offer quarterly guidance.
It just kind of sits there, doing absolutely nothing, and people apparently love the stuff.
You don’t need to have an advanced degree in either history or finance to know that human beings have used gold as some form of store of value and/or medium of exchange for a very long period of time. No matter what has happened to various kingdoms, khanates, empires and republics over time, gold has maintained its allure.
Think about that last sentence. Governing entities have vanished from the face of the earth, and people are still clamoring for gold. Arguably, it is the original store of value.
So, while I am supposed to say, “past performance is not necessarily indicative of future results,” if history serves as a guide, what do folks really want?
In aggregate? The faces on the coins? The mottos? The mis-strikes and mint imperfections? To be sure, there are any number of numismatists who want those things.
However, what about the vast majority of us? When push comes to shove, the metal is more important than the form it takes.
If that is the case, you can sensibly argue that people still, in 2025, view gold as a legitimate store of value. That isn’t terribly insightful, is it?
Let me ask you something. When a natural catastrophe, like a hurricane or blizzard, is imminent, what do people buy? What is in the greatest demand? Baseball cards? Beach umbrellas? So-called collectibles from the Franklin Mint? Beanie Babies or anything to do with Pokémon? Caviar?
Unless my experience is completely unique, it seems folks tend to stock up on things like bread, bottled water, milk, peanut butter, batteries, bandages and other, shall we say, more useful items. Things they can actually use if and when a worse-case scenario happens.
So if demand for a store of value like gold is growing, as evidenced by the increase in price, what must that mean? That is IF the metal is more important than, say, the coin itself?
In my opinion, it would seem global investors, in aggregate, are looking to mitigate their potential downside by owning too many fiat global currencies. After all, it is far easier to debase paper money than it is an ounce of gold. You just print more of the stuff. However, an ounce is an ounce is an ounce.
Clearly, you could interpret that last paragraph to suggest I am predicting a sudden explosion in the global money supply. While I am merely making an observation based on historical trends, there is some potential. After all, I am not certain how politicians across the world are going to be able to “keep their promises” without some financial sleight of hand or the printing press. It doesn’t matter if it is a $1 trillion coin or some other such tactic.
The money will have to come from somewhere. Either that, or we will have to determine a new definition of success for a lot of people.
No, I am not trying to be too apocalyptic. Would you like the surge in the amount of money sloshing around the economy to be gradual or immediate? Because it is coming, and that isn’t that difficult of a prediction.
According to the Federal Reserve, M2, the most commonly used definition of money in the U.S. has increased from $4.639 trillion at the end of 1999 to $22.195 trillion at the end of 3Q of 2025. What is that? A measure of almost 5 times?
Meanwhile, an ounce of gold is still an ounce of gold.
Therefore, again, if history serves as a guide, the money supple will continue to expand in the United States moving forward. Given the size of the base, as mentioned in the previous paragraph, even a relatively modest growth rate will result in a huge absolute number.
For instance, according to my calculations, M2 has grown at an annualized rate of 6.26% since December 31, 1999. Using the Rule of 72, the money supply will double in roughly 11.5 years at the growth rate moving forward if that rate were to persist..
How, does $44.390 trillion in April of 2027 sound to you? A little scary? Sort of like monopoly money? Funny money? Think global central bankers have noticed this AND the “explosion” in their own currencies as well?
Couple the inevitable increase in the global money supply with the increased ease of buying ‘gold’ for the average retail investor and, voila. This recent rally isn’t as surprising as it may seem. In fact, you might argue that it is a little overdue.
But will it continue? Great question.
I think it fair to wonder if the strength of the recent rally will likely dissipate. While the global financial conditions should likely remain favorable for precious metals for the foreseeable future, I would be hard-pressed to forecast 2025’s outsized returns moving forward.
With all this said or written, I WILL give you once concrete piece of practical advice. IF you own a lot of gold or silver jewelry, or other accoutrement, it might not be a bad idea to reappraise some of your valuables for insurance purposes.
There are a heckuva lot worse problems to have than that. However, that is simply what happens, and what one might do, when the spot price of gold hits $4,000 troy/ounce.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
John Norris
Chief Investment Officer
Please note, this material is provided for informational and educational purposes only and should be considered or otherwise construed as investment advice or an offer to buy or sell investment services or securities of any type. Oakworth Asset Management and Oakworth may hold positions in Gold ETFs in certain investment models. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as well as those of our Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank, Oakworth Asset Management or the official position of the company itself and may change without notice. Past performance does not guarantee future results. Data sources are believed to be reliable but not guaranteed as to accuracy or completeness.
Oakworth Asset Management, LLC (“OAM”) is a registered investment adviser that is owned by Oakworth Capital Bank Inc. (“OCB,” or together with OAM, “Oakworth”), Member FDIC. This piece describes the services of both OAM and OCB, but please note that they are two separate entities that provide different services. All investment adviser services including investment management and financial planning are provided by OAM. Because of the ownership relationship and possible involvement by OAM associates with OCB, there exists a conflict of interest to the extent that either party (OAM or OCB) recommends the services of the other. For additional information about OAM, including its services and fees, send for the firm’s disclosure brochure using the contact information contained herein or visit advisorinfo.sec.gov.