Opinion: All that glitters

Jason Flores

Last year was excellent for investors. The S&P 500 stock index provided a third year of double-digit returns; foreign stocks had their best performance in years, handily beating the returns of U.S. stocks by a wide margin; and bonds provided their best returns since the pandemic. Investors certainly had reasons to be happy. 

The real story of the year was the performance of precious metals – gold, silver and platinum. While this is good news for those that own precious metals, the larger story is what the price move, particularly in gold, is telling us.

Gold has now outperformed the S&P 500 index in each of the last three calendar years. This performance signals there is a significant long-term shift underway. which has implications for the U.S. The acceleration of this shift can be traced back to Russia’s invasion of Ukraine and the U.S. response of confiscating Russian assets, including gold held abroad, and removing them from the international payments system.

This spurred central banks to ramp up purchases of gold led by China and India, while also demanding physical delivery of the metal within their borders. Brazil’s central bank resumed gold purchases for the first time since 2021, adding over 42 tons in the last quarter of 2025, even as gold hit record prices. The BRICS countries led by Brazil, Russia, India, China and South Africa have discussed a single currency for years to compete with the dollar. It has been hard to imagine a BRICS currency as viable for a variety of reasons. But if BRICS countries continue to stockpile gold, the threat to the dollar becomes more concerning. They seem to remember the golden rule: The person that owns the gold makes the rules. 

Gold surpassed the euro in 2024 to become the second- largest reserve holding in the world. There is no immediate threat to the dollar; it is used overwhelmingly in trade and is the largest reserve asset in the world. But changes are afoot, and we may find ourselves in a different world sooner than we think.

There is a litany of reasons other countries would love to abandon the dollar including the ability to weather U.S. economic sanctions, concerns regarding our growing debt and annual deficits, our inability to agree on a budget, and the lack of control over interest rates and inflation in their own country caused by decisions in the U.S. A quote often attributed to Mayer Rothschild sums it up: “Let me issue and control a nation’s money and I care not who writes the laws”. For decades, the U.S. has effectively controlled world economic affairs through the dollar. 

What would a dramatic change in the dollar mean for the U.S.? The last reserve currency was the United Kingdom’s pound sterling until the Bretton Woods agreement in 1944. There are significant differences in the UK and the U.S., but the UK certainly isn’t as dynamic as it once was.

A significant reduction in the use of the dollar would affect quality of life due to price increases for imported products. Also, with more limited use of the dollar globally, our ability to borrow in massive amounts from other countries at low rates would be reduced. This could cause our government to balance the budget and pay down debt. Both good things, but painful for an economy and citizens used to being fueled by debt.

The best protection is two-fold: diversify investments into other countries and own gold. Owning foreign assets such as stocks or bonds from foreign countries is easily accomplished through the purchase of mutual funds or exchange-traded funds. There are different ways to own gold. Most people think of physical coins or bullion, but there are several investment funds that own physical gold and provide an easy way to join central banks around the world in owning the precious metal.

The only constant is change. It is ironic that the best protection for potentially negative change is a metal that doesn’t.

Jason Flores is executive vice president and chief investment officer at Central Trust Co. He can be reached at
jason.flores@centraltrust.net.