Why Gold Became 2025’s Go-To Macro Hedge

Gold didn’t just work in 2025 — it led. Prices set repeated records and, by early September, hovered near fresh highs. Big-name allocators openly framed bullion as protection against twin risks: sticky deficits and policy shocks. Marquee hedge-fund voices have explained why this run is potentially different.

What changed in 2025

Gold’s price action did the talking. Spot prices printed records during the spring and posted new highs into September, as softer U.S. data raised the odds of Fed cuts amid increased uncertainty around Fed independence . That combination — high starting deficits plus easier policy risk — is exactly the cocktail that tends to pull capital toward non-yielding, issuer-free assets.

Gold's notable breakout in 2025; source: Financial Charts

At the same time, central banks stayed net buyers: the World Gold Council estimates official purchases of roughly 166 tonnes in Q2 2025, moderating from prior quarters but still well above the long-run average — a steady “floor” for demand. Non-U.S. central banks now hold more gold in reserves than U.S. Treasuries - a trend that the PBoC started in 2014 by not adding to its Treasury holdings and relentlessly buying gold over the last 5 years.

High-profile voices helped normalize an allocation. Ray Dalio reiterated gold’s portfolio role and suggested 10–15% as part of a diversified book; David Einhorn publicly restated his bullish case (with the caveat that a blow-off would worry him), and John Paulson repeated his long-term, higher-price thesis. It is notable that marquee hedge fund managers framed gold as a hedge for deficits/policy shocks, not just inflation.

Why gold worked so well this year

1. Deficit anxiety met central-bank demand. Persistent official buying meant less free float just as fiscal worries pushed investors toward assets with no issuer risk. That’s a different backdrop from past cycles driven mainly by ETF flows.

2. Policy and tariff uncertainty raised the option value of insurance. When headlines can change real rates, FX, and trade in a single week, a small allocation that performs in “tails” earns its keep. Financial reporting has linked fresh highs directly to tariff chatter— exactly the kind of policy risk gold tends to price first.

3. A broader buyer base. Beyond central banks, strategies that harvest carry on top of bullion (covered calls, cash-secured puts, or futures basis) drew flows — one reason a yield-enhanced gold ETF could post standout YTD numbers earlier in the year.

4. Gold's characteristics as a financial asset. Gold prices tend to move inversely to real interest rates, as it is a non-productive store of value. Thus it tends to be positively correlated to TIPS as well as nominal bonds. With equities, gold has a complex relationship, as its price  benefits from the rise of liquid wealth, but it also acts as a safe heaven, implying a negative correlation during elevated market activity. Thus gold has had a historical correlation of around zero to stocks with its sign changing frequently
   
   Gold correlation to stocks and bonds; Source: D.E. Shaw & Co
   
   Given that the stock-bond correlation has turned again positive over the last few years, an asset with about zero correlation to stocks has a higher portfolio utility.
   
   
   Stock-bond correlation over a 12-month rolling window; Source: D.E. Shaw & Co
   

What are the hedge fund managers' theses

• David Einhorn (Greenlight) — leaned into gold and reiterated the thesis that deficits, not CPI, are the key driver now; Greenlight highlighted gold alongside selective shorts in recent reporting (May 2025: CNBC remarks reported by financial outlets). For an LP, that’s a clean “hedge-sleeve plus stock selection” pairing.

• John Paulson — repeated a multi-year bullish view tied to de-dollarization and central-bank demand (April 29, 2025: in a Reuters interview forecasting gold near $5,000 by 2028). Even if you disagree with the magnitude, the framing (balance sheet hedge vs. growth asset) is allocator-useful.

• Ray Dalio (Bridgewater) — his public 10–15% “insurance” framing (July 28, 2025: in a Kitco News interview) has given investment committees cover to discuss a distinct, rules-based gold sleeve rather than ad-hoc trades.

Risks that come with the shine

Gold can overshoot. If real yields reset higher or policy fears fade, you can give back gains quickly. Central-bank buying could also slow (it already moderated in Q2), removing a key pillar of demand. Treat the position like insurance—reviewed, not traded daily—and avoid funding it with the very risk it’s meant to protect.

Bottom line

In 2025, gold earned its seat at the table. Prices broke records, central banks kept adding, and well-known managers framed bullion as the cleanest hedge for deficits and policy surprises. If an investor sizes it thoughtfully and picks the right vehicle, a small gold sleeve can make an otherwise equity- and credit-heavy book sturdier—exactly when sturdiness is scarce.