(Kitco News) - Renewed geopolitical uncertainty fueled by growing global sovereign debt concerns has pushed gold prices back above $5,000 an ounce. Although the market could continue to face turbulent headwinds, one analyst said investors should stay focused on the precious metal’s long-term potential.
In an interview with Kitco News, Joy Yang, Global Head of Index Product Management at MarketVector Indexes, said that gold’s recent volatility after hitting a record-high $5,600 an ounce is not surprising, even if it has been unsettling for investors and frustrating for analysts trying to keep pace with rapidly shifting narratives.
“Gold is not a risk-free asset, and it never has been,” she said. “It has different drivers of risk than equities and bonds, and that’s actually its strength from a diversification standpoint. But investors shouldn’t forget that it can be volatile. If you’re trading this volatility, you’re likely to get burned. The better approach is to be strategic, think long term, and decide where gold belongs in your portfolio — then stay there.”
Yang said she expects volatility to normalize as speculative positioning clears out, allowing investors to reassess gold’s role in portfolios based on fundamentals rather than price momentum alone.
Despite the recent volatility, Yang pointed out that gold prices are still holding on to some unprecedented gains, which should help to stabilize investment demand.
“Over a one-year period, gold is still delivering one of the strongest positive returns across asset classes,” Yang said. “And if you step back and look at the past 20 years, the trend is spectacular — even though it’s been unfolding very quietly.”
At the start of a new trading week, gold is seeing some renewed demand as investors continue to focus on growing government debt worldwide. The Japanese Prime Minister’s early election gamble during the weekend paid off as Sanae Takaichi’s Liberal Democratic Party (LDP) won 316 seats, comfortably surpassing the 261 it needed for an absolute majority in the 465-member lower house and the highest number since the party was founded in 1955.
Along with her coalition partner, the Japan Innovation Party, which won 36 seats, Takaichi can act as a supermajority with two-thirds of seats in Parliament, allowing her to push through her economic agenda and override the upper chamber, which she does not control.
Takaichi has proposed implementing an aggressive expansionary fiscal plan of around ¥20 trillion ($135 billion) and tax cuts.
Yang said that ballooning sovereign debt levels across developed economies are reinforcing gold’s role as a hedge against credit risk and currency debasement.
“Sovereign credit risk is real,” Yang said, pointing to rising debt burdens in the U.S., Europe, and Japan. “Defense spending, energy security, food security — all of this implies structurally higher government spending. That naturally feeds into concerns about long-term fiscal sustainability.”
Those concerns, she said, have helped transform what began as a macro hedge into a momentum-driven rally that ultimately proved unstable, at least for now.
However, instead of focusing on the recent near-term price action, Yang said that investors should think in terms of strategic allocation rather than chasing upside targets.
“A 5% allocation to gold is becoming more normalized in diversified portfolios,” she said. “But getting there from current levels won’t happen overnight. It will be gradual — shaving exposure from other assets and reallocating over time.”
Although some traders have started comparing gold and silver to volatile meme coins, Yang said that the precious metals remain important safe-haven assets and portfolio diversification tools.
“Non-correlation doesn’t mean assets never move in the same direction,” she said. “It means they respond to different drivers over time. The current correlation is not permanent — just as today’s unusually low equity volatility is not permanent.”
