Gold and the Fragility of Money

How can I argue against something that’s risen more than 50% in US dollars and 35% in euros this year?

Best not to, because there’s little to gain. Still, I don’t want to avoid the topic. Lately, we’ve been asked time and again about our view on gold. Why? Because it’s not a fixed component of Gutmann’s portfolio management.

Let’s make one thing clear: we have nothing against gold. Quite the opposite. For many years, we’ve offered clients the option to buy physical gold and store it safely in Switzerland. Rather than setting a fixed allocation for everyone, each client can decide individually how much gold they want to hold.

A Swimming Pool Full of Emotion

Gold has fascinated humankind for thousands of years, both materially and emotionally. It doesn’t corrode, can be divided, and is accepted everywhere. Above all, it’s scarce. The total amount of gold ever mined – about 200,000 tonnes – would just about fit into the 50-metre pool at Vienna’s Stadionbad. And it’s only growing slowly.

If money can be created at will but gold cannot, its price should rise over time. But why has it risen more than inflation? That question remains open. One possible explanation for the recent price surge lies in the growing loss of confidence in government-issued currencies – the so-called fiat money. While Bitcoin enthusiasts proclaim the death of paper money, many crypto-sceptics turn instead to an old refuge: gold.

Entrepreneurship Creates Value

Money is a short-term medium of exchange but a poor long-term investment. Even with just 2% inflation per year, it loses half its purchasing power over 30 years. That’s why cash holdings are not a strategic position in Gutmann’s portfolio management mandates.

The only investment that grows beyond itself over time is equity. Entrepreneurship creates value, adapts, competes, and reinvests profits into the future. An ounce of gold, on the other hand, will always remain an ounce of gold. So what makes more sense, owning businesses or hoarding gold? For me, the answer is clear.

Where Would It Come From?

Of course, one can argue that a small gold allocation – say 5% - doesn’t hurt. But where would it come from? From equities? Then I lower my return potential. From bonds? Then I increase volatility. 

Gold can move differently from equities, but it doesn’t have to. During the 2008 financial crisis, it fell because liquidity was all that mattered. In 2025, both gold and equities are rising at the same time.

I’m no enemy of gold. I even wear a gold ring. But I wouldn’t recommend art, diamonds, or fine watches as investments either. They can be valuable, but they don’t generate earnings. Without that, you can’t calculate fair value and you lack orientation. And that’s precisely what thoughtful wealth management requires.