Portfolio Perspectives on Gold and Silver

Precious metals including gold and silver have seen significant gains in recent years, drawing considerable investor interest. With gold exceeding $4,700 per ounce and silver climbing above $90 per ounce, both metals have reached unprecedented levels. Even with recent pullbacks (~10%) as we saw last Friday (1/30/26), looking at the returns over the past few years is exciting. Such impressive returns naturally prompt questions about whether these assets deserve a place in investment portfolios. Understanding their historical behavior and role within a diversified strategy is essential for making informed decisions.

Despite their reputation as "safe haven" assets, precious metals and other commodities are subject to significant volatility and cyclical patterns. Current gains in gold and silver are unfolding against a backdrop of uncertainty regarding monetary policy, fiscal direction, and global geopolitical tensions. Rather than viewing these as speculative opportunities, investors should consider how they align with long-term financial objectives within a comprehensive investment framework.

Uncertainty drives precious metals demand

Multiple factors have contributed to rising prices for gold and silver. Recent tensions between the White House and the Federal Reserve have sparked concerns about central bank independence and monetary policy direction, particularly as Jerome Powell's term as Fed chair approaches its May 2026 conclusion. When interest rates fall and inflation concerns mount, the dollar tends to weaken, prompting investors to seek alternative stores of value.

Additionally, central banks worldwide have been actively accumulating gold as they diversify their reserve holdings away from dollar-denominated assets. These institutions require sufficient reserves to support monetary policy objectives and currency stability. Such purchases have intensified amid growing geopolitical tensions and concerns about currency fluctuations.

Timing precious metals rallies proves challenging

Historical patterns show that precious metals often rally during periods of monetary policy uncertainty. During the 1970s, both gold and silver surged dramatically amid stagflation, reaching peaks around 1980. Similar patterns emerged during the 2008 financial crisis and the 2020 pandemic. However, these rallies typically reversed once conditions stabilized.

Investors face two key challenges when chasing recent performance.

First, predicting precious metals prices requires accurately forecasting interest rates, inflation, and other economic variables, which in itself is a notoriously difficult task.

Second, history demonstrates that timing these rallies is extremely challenging. Gold's 1980 peak above $800 wasn't reached again until 2007, illustrating how long periods of underperformance can follow dramatic rallies.

The accompanying chart compares gold's performance to the S&P 500 since 2007. While gold has delivered strong returns during certain periods, the stock market has also performed well over this timeframe, highlighting the importance of long-term perspective rather than focusing solely on recent precious metals gains.

Align precious metals with investment objectives

The rationale for including precious metals stems from their distinct behavior relative to stocks and bonds. Their value is driven by scarcity, their function as stores of value, and industrial applications, causing them to respond differently to market events. This differentiation can provide portfolio stability. However, precious metals generate no income, making them difficult to value and contributing to their boom-and-bust nature. Overweighting these assets may sacrifice the long-term growth potential of equities and income generation of bonds.

The skittles above chart illustrates that many asset classes have contributed to recent portfolio returns, not just precious metals. While gold and silver have performed well, successful investing involves constructing portfolios that can benefit across various market conditions rather than concentrating on recent outperformers.

We at Whitaker-Myers Wealth Managers believe that chasing is not a strategy. There will always be the new ‘hot’ ticker, but in most cases by the time the public investors join the ‘party’ most of the gains are behind. Having a diversified portfolio while gaining exposure to these ‘hot’ stocks, is the best way to manage your risk, peace of mind, and long term outlook.

If you’re looking for some advice and would like to discuss these opportunities with one of our advisors, click HERE to schedule a meeting with one of our financial advisors.