Remember the Perils of Chasing Heat Gold and silver are all over the news. That alone should give investors pause. In my read of the current market environment, the rally in precious metals is increasingly being supported by a growing list of rationales for why prices are sure to keep rising. Chief among them: - Trade tensions and tariff uncertainty have prompted central banks to ‘hedge’, increasing purchases of gold reserves.
- Ongoing geopolitical risks, spanning the Middle East to Eastern Europe to Venezuela and Greenland, have reinforced the appeal of perceived “safe havens.”
- Concerns that heavy government spending and monetary stimulus (via lack of Fed independence) could weaken the dollar and thus strengthen the appeal of gold.
- And somewhat classically, as prices kept moving higher, fear of missing out has pulled in more retail dollars.
It’s worth stepping back and recognizing what these arguments above have in common. They are largely forward-looking concerns that often bake in worst-case outcomes and rest on several assumptions at once. The critical question for investors isn’t whether these risks exist, but what happens if reality turns out to be less dire than expected.
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We saw a clear example of that just last week. When news broke that Kevin Warsh would be nominated as the next Chair of the Federal Reserve, precious metals sharply sold off. Markets broadly view Warsh as a disciplined, independent central banker—someone who has argued for a smaller Federal Reserve balance sheet and a more restrained approach to monetary policy. That perception alone was enough to force a reassessment of the so-called “dollar debasement” trade that had been supporting gold and silver prices. No policy had changed, but an assumption had. Prices adjusted accordingly. In my view, this example offered a timely reminder of how quickly sentiment-driven trades can reverse when expectations shift. The outcome was less-bad-than-feared, which unwound the rationale for ever-rising prices. History offers plenty of similar lessons. During the Greek sovereign debt crisis in the early 2010s, investors worried that financial stress would spread throughout Europe and threaten the global system. Gold surged to record highs amid those fears, widely promoted as a necessary portfolio hedge. Yet as sentiment cooled and the debt crisis was contained, gold went on to fall more than 40% to a trough in 2015, four years later. The 2008 Global Financial Crisis provides another example. In theory, 2008 should have been an ideal environment for gold. Instead, during the most acute phase of the crisis, gold declined alongside other risk assets as investors sought liquidity and reduced exposure broadly. The takeaway isn’t that gold is a bad investment; it’s that assets driven primarily by sentiment can behave in unexpected ways precisely when investors expect them to provide protection. This pattern isn’t unique to commodities. Financial markets are full of episodes where investors chase recent winners based on narratives that feel compelling in the moment, only to discover later that price momentum and emotion—not durable fundamentals—were doing most of the work. When those emotions shift, reversals can take hold quickly. Remember, long-term investment success does not rely on identifying the hottest trade of the moment. It is built on aligning portfolios with financial goals, time horizons, and risk tolerance, and building an allocation of assets with identifiable drivers of return. Stocks generate earnings and cash flow. Bonds provide income and contractual payments. Their returns can fluctuate, sometimes sharply, but they remain tethered to economic activity. Gold does not have these properties. Bottom Line for Investors It is easy to feel pressure to act when a particular asset is getting attention and prices are moving quickly. As gold’s recent run shows, those moves are often supported by a stack of assumptions that can change faster than investors expect. The key takeaway here is not about the pros and cons of owning gold. It is about recognizing how sentiment-driven trades behave. When prices are rising on narratives rather than fundamentals, reversals can happen quickly once expectations shift. For long-term investors, the more reliable approach is to focus on asset allocations built around financial goals, time horizons, and risk tolerance, and rely on assets with identifiable drivers of return. It also means resisting the urge to chase what’s hot simply because it’s getting attention. For retirees, resilience matters more than recent performance. A disciplined plan that can absorb surprises is more reliable than one tied to a single narrative. Our free guide, How to Build a Retirement Plan Designed to Withstand Uncertainty 2 explains how to build a strategy designed to stay flexible and resilient as market and economic conditions change. In this guide, we explain: - How to diversify across time, tax treatment, and income sources
- Which overlooked risks pose the greatest threat to long-term security
- How to build flexibility into your withdrawal and investment approach
- Why annual reviews are essential for staying on course
- How a research-driven advisor can help reinforce durability
- And more…
If you have $500,000 or more to invest, request your complimentary copy of the guide to better understand how to build a more resilient retirement strategy. 
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