2025 turned out to be a transformative year for global markets, with gold emerging as the standout asset, delivering a whopping 65% return in dollar terms. This performance eclipsed the 18% gain of the S&P 500 and highlighted a significant pivot in investor sentiment and global currency trends.
Currency Devaluation and Market Shifts
The key driver of this dramatic shift was the devaluation of the US dollar, which fell 39% against gold and registered double-digit losses against major currencies like the euro (+12%) and the Swiss franc (+13%). This dollar weakness was fueled by a combination of Federal Reserve policies and diminishing foreign demand for US assets, alongside skyrocketing government debt nearing $10 trillion in refinancing needs.
Gold’s Resurgence in 2025
Gold’s remarkable performance wasn’t just a reflection of dollar devaluation—it also became the preferred safe haven for investors looking to protect wealth amidst geopolitical uncertainty and inflationary pressures.
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Global Market Leaders: Europe and China
European and Chinese equities shined brightly in 2025 as investors increasingly diversified out of dollar-denominated investments. European stocks surpassed their American counterparts by a notable 23%, while Chinese equities outperformed US stocks by 21%. Emerging markets also stole the spotlight, boasting a strong 34% return.
The Role of Federal Reserve Policy
The Federal Reserve’s aggressive monetary easing and rate cuts might have supported equities and long-term assets like gold, but it also left the market exposed. Ten-year Treasury bonds returned 9% in dollar terms, but real returns were negative in stronger currencies.
This policy environment left equity valuations stretched, and credit spreads reached historically tight levels, amplifying risks for investors in 2026.
Political and Geopolitical Risks
As the US approaches its 2026 midterm elections, expected political shifts, including potential Republican losses in Congress, could further disrupt market stability. This uncertain landscape heightens the appeal of assets like gold and real estate, robust to policy reversals and geopolitical tensions.
Additionally, geopolitical tensions and reduced appetite for US-denominated assets have contributed to this massive pivot from the dollar to foreign investments.
What Lies Ahead?
Ray Dalio, founder of Bridgewater Associates, emphasized that these broader economic and political dynamics could fundamentally reshape the global financial landscape. Investors are urged to remain vigilant, diversify portfolios, and consider adding hedged assets like gold to counter the potential volatility ahead.
For those looking to stay ahead of the curve, now is a great time to re-evaluate your investment strategy. Whether you’re exploring gold investments or diversifying into international markets, positioning yourself for resilience is key in these changing times.
