Is Gold at all time highs still safe to trade?

VTS Community,

Is Gold at all time highs still safe to trade?

For anybody who's been paying attention to the markets lately I would say besides the self inflicted wound of crushing the US economy through punitive tariffs, the big standout story has to be the performance of Gold. 

For context, this is a 20 year chart:

As we can see, gold isn't exactly a consistent asset class.  Performance was outstanding before and during the financial crisis, but then it really struggled up to 2015.  It had another nice run from 2018 up through Covid in 2020, and then again pretty flat for a few years.  

In the last 2 years it has gone parabolic which has been very nice since we've also held Gold a decent amount for safety in our Tactical Volatility Strategy when the market is too risky for Short Volatility SVXY, and we have benefited very nicely from those Gold positions.  They've made money for us when the market is going down.

However, this parabolic move in Gold recently makes it completely natural to start questioning whether it's even safe to hold anymore.  Could it really keep going higher or is a crash imminent?

We only hold gold 1/3 of the time

The big question from our perspective as tactical investors isn't whether gold will continue to go up.  The only question that matters for us is:

Will gold continue to go up when we hold it?

Since inception in January 2012 the Tactical Volatility Strategy has been in safety positions 37% of the time.  What gold does the other 63% of the time doesn't affect us at all.  We only hold Gold during elevated Volatility when it's too risky to be shorting Volatility.

Gold positions ONLY in the Tactical Volatility Strategy:

When we isolate only those days holding Gold my conclusion is, adding 7% annual return to our strategy on only 37% of trading days is exceptional performance that I would gladly take if it was offered for the next decade or two.

* Remember, the underlying strategy itself is mostly a Short/Long Volatility Strategy, and the bulk of performance is coming from either SVXY or VXZ respectively.  

It's not a Gold strategy, so adding 7% extra CAGR when it's just a "parking spot" for capital when Volatility is ambiguous is exceptional.  Those 37% of trading days we are holding gold are the ambiguous difficult periods in the market where most investors are struggling.  It's the one-two punch of both a great return, and at the exact time you want it most.

We don't need to underperform if Gold does

Obviously I don't have a crystal ball to see the future path of gold, but I will say that performance chart above does give me a lot of confidence that at the very least, gold should perform reasonably well at the times that we would be holding it.

The reality of the investment world is, people do rotate capital around between asset classes, but they very rarely shift into all out cash.  Large institutions especially are not in the practice of moving clients to Cash because of course that would mean they aren't getting paid nearly the fees they would be if they just moved capital around.

There are very few asset classes that offer any protection when equities are struggling.  Treasuries used to but not so much anymore.  Utilities are good as well which we use in our Defensive Rotation Strategy, but Gold is also on that short list.  It has long been a default safety position during times of uncertainty.

2025 seems to be the very definition of uncertainty and gold is rocketing!

While it's definitely possible we're in for some rocky times and larger day to day fluctuations in the price of Gold, I am still confident that the overall status of "safety" still applies.  I'm going to follow our systematic trade signals, knowing there could be the occasional bad day in the Gold market to come.  That risk is better than the alternatives.

It's not the worlds sexiest asset class, and I would never buy & hold Gold, the long-term performance is just too inconsistent for that.

But as a pure safety position on 37% of the risky days, Gold has been exceptional and I will continue to trust in the shiny pet rock.