Gold at a record above USD 3,500: its role beside illiquid assets

Spot gold reached USD 3,526 an ounce on Tuesday, 2 September 2025, a record, and has gained nearly 34 per cent since January. For an investor whose money sits largely in funds, company stakes and property, that changes less than the headlines suggest. Gold is a small, liquid reserve that depends on nobody's valuation; how much of it you hold should follow from that job and not from this week's price. For German taxpayers the form in which it is held then decides whether a gain is taxed at all.

Why is gold at a record?

Three things came together. Markets expect the US Federal Reserve to cut rates at its meeting on 17 September; on Tuesday they priced a 92 per cent chance of a quarter-point cut. Gold pays no interest, so it looks better when interest elsewhere falls. The dollar has weakened all year, and public pressure from the US administration on the Fed has made some investors less sure that the central bank will stay independent.

The third factor is older than this year. Central banks added 1,045 tonnes to their gold reserves in 2024, the third year in a row above 1,000 tonnes, according to the World Gold Council; the average from 2010 to 2021 was 473 tonnes. In the second quarter of 2025 they bought another 166 tonnes. That is slower than a year ago, and the first-half total of 415 tonnes is 21 per cent below the first half of 2024, but still well above the old average. In the Council's 2025 survey of reserve managers, 95 per cent expect central bank gold reserves to rise over the next twelve months.

Private money has followed. Holdings of the SPDR Gold Trust, the largest gold-backed fund, stood at 977.68 tonnes on Tuesday, the highest since August 2022.

None of this says where the price goes next, and we will not guess. The same list of reasons was available at USD 2,700.

What does the record look like in euros?

Less dramatic. An ounce costs roughly EUR 3,000 this week. Because the dollar has fallen against the euro since January, a euro investor's gain in gold this year is clearly smaller than the 34 per cent a dollar investor sees. It is the currency effect we described in the first half of 2025 for euro investors, applied to a metal instead of US shares.

It matters for the role gold is supposed to play. Gold is priced in dollars. For someone who spends euros, part of what gold does in a crisis is really the dollar moving, and the two do not always move in the helpful direction together.

What gold does next to funds, stakes and property

Take the properties of a typical private-markets portfolio. A fund commitment can call money at ten days' notice and returns it when the manager decides. A stake in a start-up has no price between financing rounds. A flat can be sold, in months. The NAV on a quarterly report is an estimate made by the party that is paid on it.

Gold is the opposite on each count. It can be sold on any trading day at a price nobody has to appraise. It makes no capital calls. It has no manager, no reporting date and no counterparty, if it is held physically or with a claim to delivery. That is what it is for in such a portfolio: one piece whose value and availability do not hang on the same people and the same calendar as the rest.

It is not a substitute for the cash you need for calls, which we covered in planning liquidity for capital calls. Money that has to be there on a fixed date should not fluctuate, and gold fluctuates. After its 2011 peak near USD 1,900 it fell by about 45 per cent to roughly USD 1,050 in December 2015, and did not pass the old high until August 2020. Whoever had planned to pay a capital call from gold in 2015 paid it from a loss. And gold earns nothing while it waits.

So the honest size is small. The family offices in UBS's 2025 survey held on average 2 per cent in gold and precious metals, against 21 per cent in private equity and 11 per cent in real estate. That is a description, not a recommendation, but it shows how the people with the largest illiquid books treat it: as a reserve at the edge, not a position that has to carry the return.

A rally does one practical thing to such a reserve. Say you had EUR 4 million in total at the start of the year and 5 per cent of it, EUR 200,000, in gold. If everything else stood still and your gold rose by a fifth in euros, you now hold EUR 240,000, or 5.9 per cent. Unlike an overweight in venture funds, this one can be corrected in a morning. Whether to correct it is a question of the percentage you decided on beforehand. If you never decided on one, a record price is a poor moment to start deciding by feel.

The German tax point: one year, and the form matters

For a private investor resident in Germany, physical gold is not a capital investment in the sense of the flat tax (Abgeltungsteuer). Selling it is a private sale under section 23(1) sentence 1 no. 2 of the Income Tax Act (EStG). The rule is short: a gain is taxable only if no more than one year lies between purchase and sale. After a year, the gain is not taxed, whatever its size.

Within the year, the gain is taxed at the personal income tax rate, not at 25 per cent. There is an exemption limit: total gains from private sales of less than EUR 1,000 in a calendar year stay tax-free. It is a limit, not an allowance. At EUR 1,000 the whole amount is taxable.

The form of the holding decides whether this rule applies. The Federal Fiscal Court (Bundesfinanzhof) ruled on 12 May 2015 (VIII R 35/14 and VIII R 4/15) that Xetra-Gold, a bearer bond that gives its holder a claim to delivery of physical gold, is treated like gold itself: selling or redeeming it more than a year after purchase is not taxable. The court's reasoning rested on the delivery claim. A product that merely tracks the gold price without such a claim, a share in a mining company or a fund of such shares is a different thing for tax purposes, and the flat tax applies as for any security. The prospectus says which kind you hold.

Two practical consequences. Each purchase starts its own year, so someone who buys in instalments holds lots with different dates, and for coins in a safe no bank keeps that record for you. Keep the purchase receipts with the dates. And a loss on a sale within the year can only be set against gains from other private sales, not against salary or dividends.

This is the rule as it stands in the law and the ruling, not tax advice. Your adviser decides how it applies to your case.

What we would do

Decide the share first: a single-digit percentage that you could explain without mentioning the price. Choose the form second, with the one-year rule in view. Write down what you bought, when and at what price, next to the rest of the portfolio, so that gold appears in the same total as the funds and stakes it is meant to balance. Then leave it alone, including in a week when it is in the news.