E-Paper
Sign In
Sun, Dec 07, 2025 | Jumada al-Thani 16, 1447 | Fajr 05:29 | DXB 
25.1°C
iPhone | iPad
Android
Dubai: Why gold should represent 5-10% of your portfolio
Gold’s 2025 performance is a timely reminder of its portfolio value during inflationary periods and currency uncertainty
- By:
- James Maltin
The year has been a rollercoaster for global markets, a reality keenly felt by investors worldwide. The US Nasdaq Composite, a bellwether for tech-driven growth, peaked at 20,056 on February 19 before plunging to 15,268 by April 8 — a 23.9 per cent drop — amid fears of a global trade war sparked by US President Donald Trump’s tariffs.
By May 13, it had recovered to 19,010, just 1.5 per cent below where it started the year. This volatility, while unsettling, is not unprecedented. Historical downturns — like the 1973–1974 bear market, where the UK’s FT 30 index fell 73 per cent or the Nasdaq’s 78 per cent collapse from its 2000 peak — remind us that markets can be unforgiving when systemic forces collide.
Recommended For You
Yet, in the midst of this turbulence, an often-overlooked asset has been shining brightly: gold. Unpopular among growth-oriented investors, it has surged 20.42 per cent year-to-date, reaching more than $3,300 (Dh12,120) per troy ounce.
Stay up to date with the latest news. Follow KT on WhatsApp Channels.
This rally echoes its historical role as a safe haven during uncertainty, a pattern rooted in the shifting tides of global finance. The US dollar’s status as the world’s reserve currency, cemented by the 1944 Bretton Woods Agreement, is under scrutiny as Trump’s tariffs — 10 per cent on all imports, 34 per cent on China, 20 per cent on the European Union, and 24 per cent on Japan — threaten economic stability.
Bretton Woods pegged 44 currencies to the dollar, convertible to gold at $35 per ounce, a system that replaced the British pound sterling, which had dominated world trade since the early 1800s. The pound itself had overtaken the Dutch guilder in the late 18th century, following the Fourth Anglo-Dutch War (1780–1784) and the Napoleonic Wars (1795–1815). Before that, the Spanish dollar — “pieces of eight” — held sway as the first truly global currency, its influence so enduring that it inspired the $ symbol we use today.
The dollar’s gold convertibility ended abruptly on the evening of Sunday, August 15, 1971, when US President Richard Nixon announced the suspension of the gold standard, a move dubbed the Nixon Shock. Over the next decade, gold soared 2329 per cent, as inflation gripped the 1970s and the dollar’s value eroded. Today’s geopolitical tensions mirror that era — central banks, notably China, are diversifying reserves (the dollar’s share of global reserves has fallen to 58 per cent), and gold’s rally reflects fears of another devaluation. In the UAE, where the dirham has been pegged to the dollar at 3.6725 since 1997, gold’s rise in dirham mirrors its dollar performance at 20.42 per cent (though local retail prices show a 24.98 per cent increase due to market premiums), underscoring the peg’s role in tying the UAE’s investors to the US’s economic fortunes.
Gold’s 2025 performance is a timely reminder of its portfolio value during inflationary periods and currency uncertainty. Risks loom large: the S&P 500’s cyclically adjusted price-to-earnings ratio (CAPE) stands at 37, a level surpassed only in 2000 and 2021, both precursors to significant corrections — the S&P 500 fell 50 per cent post-2000. With recession fears mounting — Goldman Sachs places the odds at 45 per cent — and the US budget deficit at 4.8 per cent of GDP, confidence in the dollar may wane further, amplifying gold’s appeal.
Investing in what is unpopular often yields the greatest returns. Gold, often dismissed as a “barbarous relic”, provides stability when equities falter, as seen in its outperformance over Bitcoin, which is up only 9 per cent year-to-date. Gold is no panacea and its recent 5.8 per cent drop from April’s peak shows that it too can be volatile. Moreover, the dollar’s decline is not guaranteed; Powell’s April 16 speech at the Economic Club of Chicago signalled a hawkish stance, potentially strengthening the dollar if rates remain elevated.
Nonetheless, an allocation to gold — say, 5-10 per cent of your portfolio — can hedge against inflation and currency risk, while equities, despite high valuations, offer growth potential if navigated selectively. The UAE’s own markets, such as Nasdaq Dubai, reflect global headwinds but benefit from local growth (for example a 42 per cent rise in sukuk issuance this year). As Dubai’s DFM celebrates its 25th anniversary, having launched on March 26, 2000, its resilience offers a model for long-term investing — weather the storm, but remain poised for the recovery. The lesson is clear: in uncertain times, a strategic allocation to gold may serve to preserve and grow your capital.
James Maltin is the chief investment officer of RIM BVI. The opinions expressed here are his own and do not necessarily reflect current portfolio positioning.
Don’t just scroll. Know it all. Sign up for your daily UAE news fix.
Get the top stories of the day right in your inbox.
