Should I ‘invest’ in gold?
Peter McGahan
Monday 27th October, 2025.
NOT for the first time in 37 years, I’m being asked about the ‘next biggest thing’. In this instance, it’s gold. On each occasion, the fear of missing out (FOMO) takes over, as our brains are redirected by what’s called an Amygdala Hijack, which I’ve covered in the past in detail.
Signs to at least start walking for the hills, let alone run, are; when the pub questions are being thrown at me regarding gold; the headlines are fierce; you are being offered to borrow against gold; gold tokens are being created; and certain fund managers are lauding its surge. Just as I begin my research, gold takes a six per cent one day fall. Enough said.
This will take a short series of columns to help you to understand and then make your own educated decisions. In a world drowning in complexity, trust is rarer than gold itself.
Let me begin with - the beginning.
Around 600 BCE, in Lydia (modern-day Turkey) a ruler named Alyattes did something which would reshape the world. He took a naturally occurring alloy of gold and silver, pressed it into standardised coins, and declared them official money. He'd solved a problem which had plagued humanity since the beginning of trade: how do we exchange value when barter seems impossible? Clever lad.
Gold had all the right properties. It didn't rust or decay like iron. You couldn't easily counterfeit it because its weight and density told the truth. It divided cleanly without losing value. You could carry significant wealth in a pouch. And critically, everybody wanted it - across every culture, every religion, every empire. The Egyptians buried it with pharaohs. The Romans built empires on it. The Byzantines minted it into coins which became the dollar of their age.
Gold became money because societies collectively agreed it was scarce, durable, and trustworthy. (Politicians aren’t money however).
For nearly 2,700 years, that story held remarkably well. Then came the classical Gold Standard - an attempt to build a perfectly ordered financial machine where every country pegged its currency to gold at a fixed rate, ie, Britain: £1 = 113 grains of gold, Germany different exchange rate. Etc. The idea was cool: this would eliminate uncertainty, ensure price stability, and prevent any nation from cheating by printing excess money.
It worked well for a short while.
Michael Bordo, a scholar who has spent his career studying monetary history explains the mechanics of why it worked. Countries couldn't simply print money and inflate their way to prosperity because they were constrained by gold. Run a trade deficit? Your gold flowed out. You had to tighten your belt. This created a self-correcting mechanism, though at tremendous human cost during recessions.
Barry Eichengreen, arguably the world's leading historian of monetary systems, discovered in his research that the system contained its own seeds of destruction. Governments desperately wanted to stimulate their economies during downturns, but gold wouldn't let them. The machine was perfectly ordered but rigidly inflexible. When a crisis came - and crisis always comes - the system couldn't bend. It could only break.
And break it did.
World War One shattered it. Governments needed to print money for weapons, not store it in vaults. Launching your gold at your enemy to defend yourself isn’t overly aggressive.
After the war, nations tried desperately to restore the gold standard, but the world had changed. The financial architecture which made it possible had crumbled. Then came 1929 and the Great Depression, which transformed a standard recession into an apocalypse. Countries which abandoned the gold standard first, recovered first. Those which clung to it suffered longest.
The learning: rules which can't adapt to reality are eventually destroyed by reality. Never forget that. Read on.
After World War Two, the world needed order again. Delegates gathered in Bretton Woods, New Hampshire, in 1944, to build a better system. They created one where the US dollar, backed by American gold reserves, became the world's reserve currency. Other nations pegged their currencies to the dollar. In theory, this combined the stability of gold with the flexibility of fiat currency. The US promised to convert dollars into gold at $35 per ounce whenever another nation asked.
It was elegant. It worked. For about 27 years.
More on that next week.
I will write a guide to ‘investing’ into gold. If you’d like a complimentary copy, please call 01872 222422 or email info@wwfp.net and we’ll send you a copy when it’s published.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
