A few years ago, my mother gave me a

gold Krugerrand

. She inherited it from her own mother in South Africa, where gold has long doubled as an insurance policy against collapse. In a country plagued by currency crises, inflation, market volatility and political upheaval, the gold coin was a fail-safe if everything else went pear-shaped.

But rather than offering comfort, the Krugerrand that I had tucked away in the corner of my sock drawer for lack of more suitable storage made me increasingly anxious. What if I misplaced it? What if, in a haze of perimenopausal brain fog, I simply forgot it was there? What if it was stolen? I was pretty sure no insurance company would accept “sock drawer” as secure storage and it seemed like an onerous job to find more suitable storage for one coin.

More practically, how would I divide one coin between my two children? Saw it in half? Toss a coin for the coin? The logistics of inheritance were as troubling as the fear of losing it.

Eventually, with my mother’s blessing, I sold it in London’s Hatton Garden this summer for the spot price of gold (about US$3,989.67) and invested the money evenly into my daughters’ Junior Isas.

This week, gold has soared to new heights. The spot price climbed above US$4,000 per troy ounce for the first time, sending it more than 50 per cent up in the year to date — far ahead of the S&P 500’s 15 per cent gain. In fact, according to Claire Lincoln, global head of institutional investor relationships at the World Gold Council, gold has hit 45 all-time highs this year alone — more than during all of 2024.

The ripples are affecting other investors too. Consider South Africa, where the Johannesburg Stock Exchange has been one of the world’s best-performing markets this year. It’s up almost 30 per cent (double that of the S&P 500), fuelled in part by soaring gold prices that have benefited many of its listed companies.

Platinum has also played

a part.

One of the main drivers of gold’s recent strength has been Western investors piling into

gold-backed ETFs

, with 145 tons of inflows in September alone, primarily into U.S.-listed products. According to Lincoln, this demand has been supported by “over the counter” investors through bullish derivative structures and some increased U.S. gold futures buying.

InvestEngine, an ETF investment platform for retail investors, reported an increase in net flows into gold exchange traded commodities of more than 250 per cent this year compared with the whole of 2024.

Conversely, Chinese retail demand, which played a significant role in gold’s march during the first half of the year, especially when gold initially reached US$3,500 per ounce in April, has slowed significantly. This is evidenced by sluggish Chinese ETF inflows, a chunky US$40/oz discount in the Shanghai Gold Exchange physical market, and reduced trading volumes across all contracts on the SGE and Shanghai Futures Exchange.

Investors have stepped up their interest for two main reasons. First, there is growing evidence that a slowing U.S. economy will allow the

U.S. Federal Reserve

to lower interest rates further, with the futures market expecting cuts at each of the two remaining meetings this year. Second, increased rhetoric against the Fed and its independence, fuelled by the Trump administration, is leading to concerns about the stability of the U.S. dollar and the Treasuries market.

Granted, gold is costly to store properly. But unlike bonds, gold carries no credit risk and unlike equities, it is not dependent on earnings. It simply sits there, valued precisely because it exists outside the financial system. It is the ultimate safe haven asset and highly liquid.

The move in gold is strong, but it is also narrow. Western investors and speculators, who have been the drivers of the recent price gains, can be more fickle than other buyers of gold. Profit-taking and price corrections may become more prominent in the gold market for the rest of this year, even if further gains could be on the cards.

And, of course, while gold may glitter, it yields nothing. In calm periods, it can feel like dead weight. But as inflation erodes the real value of cash and bonds, and volatility stalks equity markets, its role as a diversifier becomes more valuable. The likes of Morgan Stanley are touting a rethink of the traditional 60/40 asset allocation to equities and bonds in a portfolio to a 60/20/20 split, where gold has an equal weight with fixed income. There is a growing debate that pension funds should increase their asset allocation to the yellow metal, in a world where stocks and bonds are moving in lock-step.

For those nearing retirement, watching on edge as the bull market climbs a wall of worry, gold offers a way to protect against the downside. A modest allocation of about 3 to 5 per cent of a portfolio can reduce overall risk without materially dragging on long-term returns. And if you’re worried about the lack of yield, you can make your own income stream by taking profits as you rebalance. As we near retirement age, it becomes more important to hedge against market volatility. And we all know it’s coming.

Gold is there to absorb shocks from sudden spikes in inflation expectations, market panics, government policies that debase currencies, or geopolitical tempers fraying. Wars in Europe and the Middle East, geopolitical fragmentation, sticky inflation and the erratic unpredictability of U.S. politics all add up to a world where investors crave protection. Gold thrives on uncertainty — and that’s the one thing that isn’t going to change.

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The Krugerrand is gone, now a line on my daughters’ Junior Isas. Did I put the money into a gold ETF for them? No way. I want to supercharge growth while they’re young, rather than turn defensive. However, I will be allocating a slice of my own pension to gold — this time I’ll store it within the confines of a self-invested personal pension.

Yes, I know, I sold gold at the wrong time, and I could very well be buying in at the top of the market. But I don’t really care. Because, as nerves fray over the upward trajectory of markets, geopolitics gets more fractious by the hour, and the old rules of strategic asset allocation shift, a little respect for the yellow metal may be worth its weight in, well, gold.

Maike Currie is vice-president of personal finance at PensionBee. The views expressed are personal.

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