In Volatile Times, Gold Is Worth Its Weight as Part of a Diversified Portfolio

Gold has always held a unique place in the global financial system. It doesn’t generate income or pay dividends, but when inflation spikes, markets turn volatile or currencies weaken, gold can almost always be relied on to buck the trend and rise to the occasion.

In 2025, this pattern has been repeating itself. Gold has climbed to near-record highs, recently trading above US$3 000 per ounce, which is up 38% from a year ago. In rand terms, the gains have been even stronger, reflecting not only global price moves but also a weaker local currency. South African investors holding gold have seen that dual benefit play out beautifully and derived significant benefit from gold’s ability to perform under pressure.

Chantal Marx, Head of Investment Research at FNB Wealth and Investments says, “If one looks at the most recent development, the drivers are all too familiar. The global economic growth outlook is uncertain, central banks are signalling caution after recent interest rate cuts, and policy uncertainty and geopolitical tensions continue to unsettle markets. Both equity and bond markets have experienced heightened volatility. Unsurprisingly, against this backdrop investor demand for gold has surged.”

Gold’s value is not only measured in returns – it’s also in how it behaves relative to the rest of a portfolio. Over the long term, gold has shown low, and often negative, correlation to major equity markets. “In fact, research by FNB shows the five-year rolling correlation between gold and the JSE All Share Index has averaged close to zero and has been negative for most periods since 2009. Even the precious metal’s relationship with offshore equities, such as the S&P 500, remains weak, with a correlation of around 0.3 for South African investors,” says Marx.

During major market downturns, this defensive quality becomes especially valuable. In 2008, while global stocks plunged, gold prices surged. In early 2020, during the Covid-19 crash, the pattern repeated itself. Investors who held gold during these events weren’t just protected; they were rewarded – and much better positioned to recover. FNB’s analysis shows that portfolios with a 5% gold allocation during these periods experienced smaller drawdowns and improved long-term outcomes.

“Gold has consistently maintained its reputation as a safe haven during periods of global uncertainty. For investors focused on risk management, gold offers a practical way to strengthen a portfolio’s resilience,” says Sebastian Pillay, Head of Share Investing at FNB Wealth and Investments.

However, Pillay cautions that not all gold investments are the same. “Investors must consider how they access gold since physical gold and gold mining stocks offer very different risk profiles.”

Gold mining equities are businesses. So, while they benefit from a rising gold price, they also carry the full range of corporate risks from management quality, cost control and debt levels to labour disruptions and operational challenges. While these shares may outperform when markets are strong, they are also often quite volatile and can fall sharply when sentiment towards bullion turns.

Physical gold, on the other hand, is ‘pure’ exposure to the asset itself. It doesn’t rely on management execution or quarterly earnings. It holds intrinsic value, is globally liquid and isn’t subject to credit risk. “An ounce of gold remains an ounce of gold, irrespective of what the markets do,” Marx explains.

In South Africa, physical exposure to gold is most often achieved through the Krugerrand. First minted in 1967, this iconic gold coin is legal tender, and it’s exempt from VAT – a major advantage for local investors. Also, while it tracks the global value of gold, it’s priced locally in rand, allowing South Africans to benefit both from international price movements and from currency depreciation.

“FNB recognises all these benefits, which is why we’ve made it simple for South Africans to invest directly in Krugerrands,” says Pillay. Through the FNB Share Investing platform, investors can buy coins online or via the FNB banking app, just like they would purchase a share or ETF. Coins are securely stored and FNB offers a guaranteed buy-back option at prevailing market rates if the coins are held in custody with FNB. That means clients can invest, store and sell their gold with confidence.

Gold is not about chasing returns but about protecting what you have built,” says Pillay. “And in today’s world, that kind of stability is worth its weight.”