Gold Investing: A Brief History, Why Prices Have Surged, and How to Invest
Gold has served as money, ornament, and store of value for thousands of years. Its modern price behavior, however, reflects several distinct monetary regimes.
Until 1971, the international monetary system tied the U.S. dollar to gold—first formally under Bretton Woods and then more loosely—so gold’s official price was relatively stable. In August 1971, President Nixon closed the “gold window,” ending dollar convertibility and freeing gold to trade in global markets.
The 1970s then produced the first major gold bull market as inflation, oil shocks, and geopolitical turmoil pushed prices sharply higher into the 1980 peak. A long bear market followed through the 1980s and 1990s as disinflation and strong equity performance redirected capital toward stocks. From the early 2000s onward, gold entered a new secular rally—driven by rising central-bank buying, post-GFC monetary easing, and retail/ETF adoption—culminating in record highs in the late 2010s and again in the 2020s.
Since August 1971, gold has delivered an annualized return of roughly 8.7%, compared with about 11.1% for the S&P 500. While equities have offered stronger long-term growth, gold has historically outperformed during inflationary spikes, currency stress, and equity drawdowns—making it a reliable crisis hedge and portfolio diversifier (see Figure 1).
Figure 1. Source: Boreal Family Office
Why Gold Has Surged Recently
The most recent leg higher in gold reflects several interlinked drivers:
• Inflation expectations and real rates. When nominal yields fail to keep up with inflation—or when real yields turn negative—gold becomes more attractive because it preserves purchasing power despite paying no interest. Markets through 2024–2025 repeatedly reacted to shifting inflation expectations and Federal Reserve policy signals.
• Concerns about sovereign debt and the dollar. Periodic worries about U.S. fiscal sustainability, debt-ceiling standoffs, and the long-term stability of reserve assets (including discussions of “de-dollarization” in some regions) have led some official and private holders to favor gold as a non-credit, non-counterparty store of value.
• Central-bank buying. A defining structural change in recent years has been the resumption and scale-up of central-bank purchases. Global central banks added more than 1,000 tonnes of gold to reserves in 2024 and continued strong buying into 2025—an institutional demand shock that supports prices and signals diversification away from pure foreign-exchange holdings.
• Investor demand through paper gold. Investment products that represent claims on bullion—commonly called paper gold—have made exposure accessible to global investors. Surging demand during risk-off episodes amplifies price moves as these vehicles translate investor sentiment into concentrated buying pressure.
Together, these forces reflect a broader theme: a search for monetary resilience in a world of rising leverage and policy uncertainty.
Figures 2–3. Sources: Money Metals; Boreal Family Office, Trading Economics
Figure 2, Source: Money Metals
Figure 3, Source: Boreal Family Office, Trading Economics
How to Invest in Gold — Physical vs. Paper Exposure
Investors can access gold through two main channels: physical bullion or financial instruments (“paper gold”). Each offers distinct trade-offs between control, cost, and convenience.
Physical Bullion
Pros:
Direct ownership of the metal, no counterparty to the issuer, and suitable for investors seeking assets outside the financial system. Physical gold is psychologically satisfying and useful in systemic or liquidity crises.
Cons:
Storage and insurance costs, liquidity considerations for very large or non-standard bars, dealer premiums above spot prices, and potential logistical challenges when buying or selling. Larger holdings often require secure vaulting and ongoing fees.
Paper Gold
Pros:
Provides easy, liquid exposure through brokerage or bank accounts, with low transaction costs compared to physical metal. Intraday trading and fractional positions are possible, making it efficient for portfolio construction.
Cons:
Carries small management or custody fees, introduces potential counterparty or operational risk, and represents indirect exposure rather than direct title to the metal. In stressed markets, paper gold demand may temporarily outpace physical supply, creating short-term price dislocations.
For most investors, a blend of both—small physical reserves complemented by strategic exposure through ETFs or funds—balances safety with efficiency.
Boreal Perspective
Gold is not a bet against progress, but a hedge against policy error. At Boreal Family Office, we view gold as one of several non-correlated assets that enhance portfolio resilience—particularly when forward-looking inflation and real-rate signals begin to diverge.