Gold fever: The perils of buying at the top
Peter McGahan
Monday 24th November, 2025.
MY late father was proud of me quoting his lines in my columns. Such is the older way, I found that out from others after he had gone. One of his lines was “when everyone starts running one way, I walk the other”.
The dinner party is lively. It is October 2025, and gold has just broken through €4,000. Suddenly, everyone is an expert and interested. “Gold’s where the smart money is, right?”. Heads nod. It feels sensible. But this is often the moment to be most cautious. When the crowd is convinced, the risk is often highest.
Fear of missing out (FOMO), or, not being in the ‘in crowd’, is the dynamic driving many gold buyers now. Behavioural economists Daniel Kahneman and Amos Tversky identified this in their studies of decision-making under stress. It is not the fear of losing money which drives most investors. It is the fear of watching others succeed without us - the smug guy at the dinner party telling you, you weren’t so bright. Just be a Millwall fan. (I’ll explain)
Carlson pointed out that from 1980 to 2019, gold returned just 2.8 per cent a year. Over the same period, US equities returned close to 12 per cent per year. Anyone who bought gold near its 1980 high had to wait until 2008 to break even in real terms. That is almost 30 years of stagnation.
By the time gold reaches its excitable high, much of what makes it appealing is already reflected in the price. What lifts it further is not new information, but investor emotion. As is explained in 'The Golden Dilemma', gold pricing is influenced more by real interest rates and investor sentiment than by inflation itself.
This pattern is not unique to gold. It has played out in other areas I’ve written about like tulip mania, tech bubbles, and housing booms. Gold’s difference is its longevity. It has always had a story behind it. That makes it feel special.
Since 2022, central banks have been adding gold to their reserves. Many countries’ leaders saw what happened with Russia’s frozen assets and acted quietly the same. These are not price-driven decisions. They are strategic decisions. By 2025, the public began to follow. But unlike central banks, most retail investors do not think in decades.
Investment banks, slow to praise gold in calmer times, are now issuing reports calling it a “must own” at €4,000. Howard Marks warned years ago that the point of maximum risk often arrives when the consensus is most confident.
If you are considering gold now, ask yourself a few questions:
Did you want to own it when it was cheaper, or only now that it is making headlines?
Are you acting from research or from social discomfort?
Remember one of my key points. Gold or any investment is never going up or going down. Never the present participle. It is either up or down, and the question is: where now?
The truth is that investors who bought gold at the highs in 1980 or 2011, or during the COVID surge in 2020, rarely enjoyed smooth returns. Prices fell, sometimes sharply. On one day in October 2025, gold dropped six per cent in a single session. That was the steepest one-day fall in four years.
Avoiding FOMO investing is not glamorous. It often means looking wrong in the short term.
But, as the Millwall chant goes, “No one likes us, we don’t care.” To succeed, long-term investors must sometimes act before the crowd joins or just let the crowd go by. Either approach is difficult. But both are better than being last on board.
Avoid buying after a sharp surge. Urgency is rarely a friend to sound decision-making.
If you still believe in the long-term role of gold, consider spreading your purchases over time.
Rebalance with discipline. When gold rallies, reduce your exposure. When it falls out of favour, consider adding gradually.
Keep your allocation realistic.
Follow the research. Studies by Harvey, Erb, Baur, Lucey and others show gold is most useful when held before the crisis, not after.
Yes of course, certain market conditions we are unaware of will push the price up, but you don’t have that logic to make the decision, instead, following the herd blindly.
The greatest risk often comes not from the asset, but from how we behave around it. Buying when it feels safest is often the most dangerous move of all.
Discipline means knowing when to act. But it also means knowing when to wait.
I will write a guide to ‘investing’ into Gold. If you’d like a complimentary copy, please call 01872 222422 or email info@wwfp.net and we’ll send you a copy when it’s published.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
