By Phil Wellington, portfolio manager at PortfolioMetrix
The gold price rose significantly through the 1970s as economic growth stagnated and high inflation took hold. In January 1980 gold twice briefly hit an all-time high of $850/oz. But then it struggled for years as inflation fell back from its late-1970s highs.
It didn’t recover in nominal terms until January 2008, some 28 years later. And that’s before adjusting for the inflation it was supposed to protect against. In real terms, gold investors who bought at the top would have had to wait until April 2025 to make their money back.
The certainty investors felt about gold as an investment back then looks a lot like the certainty many have felt about it in recent years. History doesn’t usually repeat exactly, but there are hallmarks of the 1980 lesson in gold investing worth pausing on.
Clients may ask advisers: shouldn’t we own gold? It’s not an unreasonable thing to wonder, given the headlines. But markets don’t reward compelling stories, they reward prices, and those are two very different things. We’ve all seen headlines like “the dollar is finished, own gold”. The thesis behind them has a certain surface logic.
While the US dollar still accounts for roughly 90% of foreign currency transactions globally, US government debt is high and rising. Concerns about inflation have deepened since the One Big Beautiful Bill Act of July 2025 locked in tax cuts that widen the federal deficit further, feeding a narrative that the dollar’s dominance is under threat and that gold is the natural place to hide.
There’s genuine historical evidence that gold is a reasonable inflation hedge over long periods. Looking back over more than the past 12 months, gold has appreciated strongly. But the last year alone tells a very different story.
Gold peaked at just over $5,500/oz at the end of January 2026, then fell back to around $4,000 in early July – a 30% drop in only five months. Anyone who bought into the story at the top, convinced the rally still had further to run, is sitting on a substantial loss less than half a year later.
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Gold isn’t the only asset that has convinced people it would replace the dollar. Bitcoin is another contender, and its supporters point to its decentralised store of value and a fixed supply protecting against inflation and being unaffected by government debt levels as the bedrock of that thesis.
Additionally central banks are making visible moves toward researching digital currencies in recent years. Bitcoin had a remarkable run over the past few years, climbing steadily as institutional adoption grew and the “digital gold” narrative took hold.
But over the past 12 months the pattern has been more dramatic than gold’s: it peaked in early October 2025, then fell 50% below that peak by July 2026. Investors who bought the story at the highs are down by half.
SpaceX offers an even sharper illustration of the same point, and in this instance the timeframe is even more compressed. It listed at $135 a share in the largest IPO in history, closing its first day at $161. Four days later it touched an intraday high of $225.64 on 16 June. Then, barely a week later, it fell to $147 and now the price sits around $115, near all-time lows having halved in value from it’s peak in mid June.
Very little about the underlying business or its long-term prospects changed in that time. The company was the same company throughout. Only the price moved, and the story people told themselves moved with it.
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That’s the real risk running through all three examples. Conviction completely divorced from price. The story and the price are not the same thing, and confusing one for the other is where investors get hurt.
These investments may still prove to be good in the long-term, as nothing here argues that the underlying theses are false. The trouble is buying into the story, at inflated prices, driven by the certainty that this time the narrative can’t fail.
Markets constantly tempt us to trade balance for perceived certainty, offering the comfort of a simple story in place of the harder discipline of assessing what’s actually being paid for an asset.
Anyone who gave in to that temptation on gold or bitcoin over the past year has ended up unhappy, regardless of how sound the underlying logic seemed at the time. The lesson from 1980 was that conviction is not a substitute for price discipline. 46 years on, it still isn’t.
