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. ‬

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. ‬

MENAFN24052025000049011007ID1109590040