Gold’s status as a portfolio diversifier has come into sharper focus this week as the precious metal broke through the landmark $4,000 level. The commodity — long established as a safe-haven asset in times of turmoil — has rallied this year as investors navigate the dollar’s depreciation, geopolitical fissures and lower interest rate expectations, with central banks and retail buyers alike piling in. But in a recent LinkedIn post , Christopher Cruden — a “gold-agnostic” fund manager whose Insch Kintore strategy combines FX and commodities trading — warned that investors who have bought gold to reduce portfolio risk “might be in for an unpleasant surprise.” Gold prices hit an all-time high this week, with spot prices and futures above $4,000, as investor exuberance continues. “We’ve had two or three years of gold only going up — all the world knows is that you buy gold, it goes up. But that’s not always true,” Cruden told CNBC. “When I came into this business in 1979, gold was at $850 an ounce, and that was an all-time high. Three years later, it had lost 65% to 70% of its value.” His quantitative investment strategy trades gold against the daily spot price movements of a basket of major G7 currencies. Specifically, it uses the currencies — the dollar, sterling, the euro, the yen, the Swiss franc, the Australian dollar and the Canadian dollar — as FX crosses against the precious metal. Designed as a “dynamic hedge” against gold, the Kintore fund’s computer-based trading model means it is “resolutely bi-directional,” meaning it can profit both from huge surges and sharp falls in the price of gold. Where it tends to falter is during sideways, trendless markets there is no clear direction on price, or episodic spikes in volatility, which can disrupt price momentum. “Being a systematic trend follower, I absolutely don’t have a view on gold — I don’t care if it goes up and I don’t care if it goes down. Our clients pay us to be long if it’s going up and short if it’s going down,” he said. Jonathan Unwin, U.K. head of portfolio management at Mirabaud Wealth Management, warned that gold’s current price surge may not be sustainable. Unwin told CNBC in an email that gold will likely remain in demand as a relatively uncorrelated asset class, as investors weigh up stretched valuations and AI-fuelled equity market euphoria. But he cautioned: “Paradoxically, should the correlation between gold and other asset classes increase, then for us and many others, the appeal of the precious metal would start to fade. “It is reasonable to expect there will some profit-taking as the $4000 milestone is hit, so we would not be surprised to see a pull-back from current levels before a resumption higher again.” Rebekah McMillan, associate portfolio manager on the multi-asset team at Neuberger Berman, noted how central banks have bought more than a thousand tonnes of gold each year during 2022, 2023 and 2024 — more than double the average pace of the prior decade — with China emerging as the largest buyer. “Gold’s lack of default risk, high liquidity, and “neutral” status among reserve assets make it attractive for official portfolios, especially after Russia’s 2022 sanctions highlighted vulnerabilities in dollar centric reserves,” McMillan said. On Tuesday, Bridgewater Associates founder Ray Dalio urged investors to put “something like 15% of your portfolio in gold” after likening today’s markets to the 1970s , adding that the precious metal is “the one asset that does very well” when other investments fall.
