Gold prices have declined 13% over the past month and are down 6% year-to-date, even as inflation readings surge. The May Consumer Price Index rose 4.2% year-over-year, the highest in three years, while the Producer Price Index increased 1.1% in May, exceeding the 0.7% consensus forecast. Despite these inflationary pressures, gold slipped to approximately $4,110 per ounce.
Steve Lowe, senior vice president and chief investment strategist at Thrivent, notes that gold has historically served as a long-term inflation hedge but can be volatile over shorter periods. Over the past 12 months, gold has gained 24%, and over five years it has risen 119%. However, Lowe cautions that the metal can underperform inflation for extended stretches. He advises advisors to consider interest rates, geopolitical risk, and central bank demand when evaluating gold's role in portfolios.
The 10-year Treasury yield has climbed from roughly 4.17% at the start of the year to over 4.5%, drawing demand away from gold, which offers no income. If the Federal Reserve tightens policy later this year, as many anticipate, that income could become even more attractive. The U.S. Treasury market also provides superior liquidity and scalability compared to gold.
Despite gold's price weakness, central banks continue to accumulate the metal. The World Gold Council's 2026 survey indicates that 43% of central banks plan to increase gold holdings this year, and 95% expect global gold reserves to grow over the next five years. Lowe attributes much of this buying to geopolitical risk, particularly from China and India, rather than concerns about dollar devaluation.
Ted Neild, CEO and CIO of Gresham Partners, views central bank purchases as reserve diversification rather than a move toward a gold-backed monetary system. He points to the freezing of Russian reserves as a factor that reinforced the value of holding assets outside another nation's financial system. Neild emphasizes that gold can protect against currency debasement and geopolitical shocks but is difficult to value because it generates no cash flows. He sees gold as a diversifier, not a return driver.
Dr. Preston D. Cherry, founder and wealth advisor at Concurrent Wealth, argues that central banks are signaling that no single nation's balance sheet commands unconditional trust. He notes that gold carries no issuer risk, making it attractive when policy is unpredictable and sanctions can freeze assets. However, he stresses that Treasuries still provide income, liquidity, and duration exposure that gold cannot match. Cherry recommends gold as a disciplined allocation within a diversified portfolio, not a replacement for bonds.
For advisors, the consensus is that gold should be viewed as a diversifier against institutional confidence risk, currency stress, and policy uncertainty, rather than a core holding. As the AI-led rally masks market fragility and inflation remains elevated, gold's role in portfolios warrants careful consideration. Meanwhile, affluent investors are cutting alternative targets as risk awareness rises, further underscoring the need for balanced asset allocation.
