Gold: A brief look at a long history

The story of gold is nearly as old as the story of civilisation itself. Human allure of the yellow metal began in ancient Egypt around 3000 BC, where it was seen as the flesh of gods and revered as such. In the roughly 5000 years that have transpired since then, much has changed and much has remained the same. Gold is still the enduring symbol of wealth across virtually all cultures.

But at a certain point in history gold transitioned from being just a symbol of wealth to being wealth itself. As a scarce, easy to carry, and durable metal, it maintains its value exceptionally well. For this reason, it began being used as currency, first in the ancient region of Lydia (modern-day Turkey) around 600 BC, where standardised coins were minted, allowing ease of transactions in a city that was a centre for trade.

Fast-forward to the 18th century, when Great Britain became the first to introduce the gold standard, setting a fixed rate at which the British pound could be exchanged for gold. Being the world’s foremost superpower, other nations eventually followed suit, and by 1900 the gold standard had become almost ubiquitous.

However, World War I and The Great Depression demonstrated its fragility. The gold standard proved too restrictive: in order to print new money, new gold would need to be acquired. This left governments hamstrung to react to economic crises, and many nations eventually suspended the gold standard during the 1930s.

Notably, the US retained the standard and decided instead to revalue their gold reserves from $20.67/oz to $35/oz in 1934 to help support a beleaguered economy. In an instant, the dollar’s value sharply fell and investors around the world rushed to sell their gold at the new improved price, dramatically increasing the amount of gold the US stored. Then, in 1944, the Bretton Woods system was created to stabilise foreign exchange markets and promote global economic growth following the Second World War. Under this system, each participating nation pegged its currency to the dollar, which in turn pegged itself to gold at $35/oz. However, by the 1970s, the number of dollars in circulation had far outgrown the gold reserves of the US, and the Bretton Woods system collapsed. Fiat currency became the new norm, and today, currency is no longer backed by gold—or any other asset for that matter.

Gold as an investment

While gold is not used to back currency anymore, it retains the same attributes that have always supported its demand. Traditionally viewed as an instrument of wealth preservation, in modern times, the yellow metal is more often used as a means of diversifying risk. This dual functionality is central to gold’s utility as an asset class and it’s a testament to this that gold has remained so popular in an ever-changing financial landscape. Moreover, in a world of stocks and bonds, claims and contracts, investors value gold’s tangibility.

However, investing in commodities in isolation can be quite risky. They don’t produce any cash flows like equities and bonds, making their intrinsic value difficult to approximate. Gold’s price in particular is influenced by a myriad of macroeconomic and geopolitical factors. Such is its reputation for stability, gold is a more popular safe-haven asset than even government-issued bonds.

This status links gold’s value to the risk-appetite of the market, which is itself reliant on prevailing market uncertainty - uncertainty which stems from economic instability, new governments, geopolitical conflicts, and exogenous forces. For example, gold’s price typically rises when interest rates fall as it becomes more attractive relative to bonds. This relationship can be even stronger if rates are cut in response to an economic crisis, a time when investors are searching for safety.

However, these interactions are not strictly mechanical, and each situation always carries an element of nuance. Furthermore, the factors we’ve mentioned so far only relate to demand. Gold, just like any other commodity, is also impacted simply by its supply, meaning any disruption to the mining or refining process can prove material to its value.

The portfolio approach

As we have alluded to already, going all-in on gold would be quite risky. Dissecting, interpreting, and forecasting the multitude of value drivers requires a specialist knowledge, which means investments are usually accompanied by a professional touch. As an alternative asset, it’s most commonly managed as part of a diversified portfolio due to its historically low, and sometimes even negative, correlation with equities. This relationship has allowed gold to often outperform during periods of market turmoil, helping to insulate well-diversified investors from more precipitous losses.

At Zurich, we have always held gold within our flagship multi-asset funds: the Prisma range. This allocation (among several other alternative assets) has helped to smooth out returns while also delivering growth for our customers. The Prisma funds acquire their gold exposure by investing in a physically-backed exchange-traded fund (ETF), which holds gold in a vault on our investors’ behalf.

Physically-backed ETFs more accurately track the spot price of assets than ETFs which use futures contracts. They also eliminate the rollover risk inherent in futures that can result from differences between spot and futures prices (known as contango and backwardation).

Gold is shining

The market loves a success story, and in the past three years, gold has garnered an increasing amount of public attention. Geopolitical strife acted as the catalyst for the current rally which began following Russia’s invasion of Ukraine in February 2022. Since then, gold has risen well over 100% in EUR terms, Central banks around the world, but particularly in countries like India, China, Turkey, and Poland, began aggressively buying gold after the conflict began.

While this represented a flight to safety, with gold in particular being an effective hedge against inflation, it also may represent a shift in strategy. Central banks of developing nations were likely spooked by the ability of the US and its allies to freeze roughly $300 billion of Russian foreign exchange reserves in the EU. These nations sought to diversify their reserves to reduce their reliance on currencies that could be similarly blocked or confiscated by other governments.

This trend continued through 2023 and 2024 as a second major conflict unfortunately commenced in the Middle East and extended further into 2025 as the US dollar weakened considerably.

Central banks wished to diversify away from the weakening dollar, and gold, which is typically priced in dollars, became effectively cheaper, making it an attractive alternative. Aggregate central bank purchases in the three years since Russia’s invasion of Ukraine are roughly twice what they were in the decade prior.

During that period, the price of gold has consistently reached new milestones, hitting $2,500/oz for the first time in August 2024, $3,000/oz in March 2025, and $4,000/oz at the beginning of October*. Retail investors have played their part too, hopping on the trend set in motion by central banks. They have looked to take advantage of the strong momentum that has defined this near uninterrupted rally.

As previously mentioned, historically, gold and equities have had a low or negative correlation. However, in the last three years this relationship has shifted. While gold has soared, equities have also rallied as falling inflation and interest rates have backed the rise of the Artificial Intelligence (AI) thematic.

An interesting fact: The S&P 500 and gold have both set a new record high in the same trading session ten times in 2025, and this also occurred ten times in 2024. In the 50 years from 1973 to 2023, it didn’t happen once.

While this has benefitted investors in multi-asset portfolios, it may also raise concerns around gold’s key role as a diversifier. However, it’s important to note that both assets have been driven by their own independent forces. This makes the current correlation in returns more likely incidental than an indication of a changing relationship.

Moreover, history has shown that gold proves its true worth during market crashes, while usually underperforming during periods of market growth. But the current rise hasn’t exactly been usual.The yellow metal has significantly outperformed the global developed equity market in the past three years, perhaps offering investors the best of both worlds. Whether the impressive performance is likely to persist is difficult to say.The price of the world’s oldest asset has come an awful long way in an awfully short period of time. But the structural forces that started its meteoric rise are still present: recent data shows that central bank demand remains elevated, and interest rates are falling as inflation fears linger. Remember, the reason that gold is still worn by jewellers and portfolios alike is that it tends to retain its shine.

Why consider gold?

Gold is recognised as an excellent diversifier for investment portfolios. It typically performs differently from other asset classes, such as equities and bonds. This means that adding gold to your fund can help balance risk and may offer stability during market volatility. By diversifying your investments, you’re better positioned to achieve consistent, long-term growth.

For more information

Zurich’s Gold Fund is available as part of the Prisma fund range. The Gold Fund is also available as a standalone option across the Zurich suite of Pensions, Savings and Investment products. You can find more information on the Gold fund by speaking to your Financial Broker or visiting our fund section on our website.

*Source: World Gold Council, October 2025