Aswath Damodaran just questioned gold’s record price: Here’s why you should care
“Gold is often touted as a hedge against inflation and crises, but the evidence from history is nuanced,” Damodaran wrote. He noted that gold, unlike stocks or bonds, produces no cash flows, making it less a financial asset and more a collectible, its value driven largely by perception and market mood.
- Nov 8, 2025,
- Updated Nov 8, 2025 8:08 AM IST
Gold's explosive rally past $4,000 an ounce in 2025 may look like a safe-haven triumph — but NYU finance professor Aswath Damodaran says investors should take a closer look before betting on the yellow metal.
In a new blog post, Damodaran argues that gold is “decidedly overpriced” based on its historical relationships with inflation, equity risk premiums, and real interest rates. Despite its 57% surge this year — and a decade-long climb from $1,060 to over $4,000 an ounce — he suggests the precious metal's fundamentals don’t support the hype.
“Gold is often touted as a hedge against inflation and crises, but the evidence from history is nuanced,” Damodaran wrote. He noted that gold, unlike stocks or bonds, produces no cash flows, making it less a financial asset and more a collectible — its value driven largely by perception and market mood.
To ground his case, Damodaran evaluated two historical ratios: gold-to-CPI and gold-to-silver. The gold-to-CPI ratio hit 17.81 in October 2025 — nearly six times the historical median of 3. Meanwhile, the gold-to-silver ratio stood at 84.73, far above its historical median of 57.09. Both suggest gold may be priced well beyond its historical range.
Still, Damodaran acknowledged that persistent low interest rates and muted inflation could justify a shift in these medians, and by extension, gold’s valuation — but only to a point.
The real story, he said, lies in gold’s role as insurance. “Investors who add gold to their portfolios because of the protection it offers should recognize it more akin to buying insurance against extreme events,” he wrote, especially if their wealth is concentrated in financial assets.
As the metal decouples from its traditional valuation anchors, Damodaran hints that the recent price surge may be less about fundamentals and more about fear: “Some undoubtedly just got lucky to be at the right place at the right time, but some were prescient in detecting a shift in the market vibe, especially in 2025.”
He added pointedly, “If Jamie Dimon and Ray Dalio actually mean what they say about markets being a bubble, would it not make sense for them to hold gold?”
Gold's explosive rally past $4,000 an ounce in 2025 may look like a safe-haven triumph — but NYU finance professor Aswath Damodaran says investors should take a closer look before betting on the yellow metal.
In a new blog post, Damodaran argues that gold is “decidedly overpriced” based on its historical relationships with inflation, equity risk premiums, and real interest rates. Despite its 57% surge this year — and a decade-long climb from $1,060 to over $4,000 an ounce — he suggests the precious metal's fundamentals don’t support the hype.
“Gold is often touted as a hedge against inflation and crises, but the evidence from history is nuanced,” Damodaran wrote. He noted that gold, unlike stocks or bonds, produces no cash flows, making it less a financial asset and more a collectible — its value driven largely by perception and market mood.
To ground his case, Damodaran evaluated two historical ratios: gold-to-CPI and gold-to-silver. The gold-to-CPI ratio hit 17.81 in October 2025 — nearly six times the historical median of 3. Meanwhile, the gold-to-silver ratio stood at 84.73, far above its historical median of 57.09. Both suggest gold may be priced well beyond its historical range.
Still, Damodaran acknowledged that persistent low interest rates and muted inflation could justify a shift in these medians, and by extension, gold’s valuation — but only to a point.
The real story, he said, lies in gold’s role as insurance. “Investors who add gold to their portfolios because of the protection it offers should recognize it more akin to buying insurance against extreme events,” he wrote, especially if their wealth is concentrated in financial assets.
As the metal decouples from its traditional valuation anchors, Damodaran hints that the recent price surge may be less about fundamentals and more about fear: “Some undoubtedly just got lucky to be at the right place at the right time, but some were prescient in detecting a shift in the market vibe, especially in 2025.”
He added pointedly, “If Jamie Dimon and Ray Dalio actually mean what they say about markets being a bubble, would it not make sense for them to hold gold?”