Gold’s been used as money for more than 5000 years. Some say the fact that central banks have been buying so much gold suggests it’ll be used as money again.
Gold is often viewed as an “alternative” investment. It doesn’t act like most stocks, and its price can remain low for years at a time. Most investors only have 3% of it in their portfolios, yet now, firms like Morgan Stanley are suggesting this should be closer to 20%.
Why? Because historically, gold’s been useful during times of global uncertainty, and there’s a good example following World War II.
In 1944, 44 Allied nations, through the “Bretton-Woods Agreement”, declared the US dollar the world’s reserve currency. Foreign governments would accept it in trade, believing they could exchange it for gold upon request. It worked well until in 1971 when President Richard Nixon removed gold-convertibility completely.
The age of pure ‘fiat currency’ began (money backed by trust, not by gold).
The New Zealand dollar has lost about 5% a year in purchasing power since 1971.
So why has gold risen by more than 60% in 2025 so far? In my view, it’s because of the “debasement trade” narrative. It’s not about gold going up, it’s about the value of our currency going down.
A debasement trade is betting that governments and central banks will print so much money that currencies will lose value even faster. You can engage in the debasement trade by owning anything scarce, like gold, where there’s a large community of people who believe it’s valuable.
In New Zealand, one of the easiest ways to own gold is through ETFs (exchange-traded funds). You can access these through your online brokerage account, or even through some types of KiwiSaver funds. ETFs allow you to benefit from gold price movements, without the hassle of having to physically store it.
You may wonder, is that something people still do? Yes, in fact, some do prefer owning physical precious metals. They claim it makes them less likely to sell impulsively, or they use it as a backup plan should the banking system fail. Although bank failures might be unlikely in New Zealand, in some countries holding physical gold is the only way to save.
I once had some clients who bought gold bars and then buried them in their front lawn. They weren’t looking to get rich from their gold, rather, they were looking for a method to pass wealth down to their kids. How’s that for ‘adding value’ to your property!
If you can’t store gold at home for security reasons, though, there’s the option of storing it in bank vaults, or through specialist gold storage services.
If you like the idea of owning gold so far, what are the downsides? To start with, it’s a chunk of metal that doesn’t produce dividends, like shares in a company can.
Gold also doesn’t pay interest, like a term deposit does. And gold won’t sustain you in retirement with streams of income. In fact, the main way you’ll win with gold is if you sell it for more than you paid for it. Even hardcore gold bugs struggle with timing the market.
You should still rely on traditional mainstream investments to help you grow wealth, but alternative investments like gold can help you you protect it. An allocation to gold can be great in KiwiSaver, though ETFs or even in physical form.
Gold can offer peace of mind in a crazy world, an alternative form of money if banks fail, or even a form of intergenerational wealth. So often with investing it’s not about the investment, rather, it’s about the investor, about you.
Currencies, governments and financial systems aren’t infallible, but how much ‘insurance’ is appropriate for your situation is a conversation worth having with someone who understands your complete financial picture.
Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.
