If you keep an eye on the markets, you may have seen that the price of gold has been falling after reaching record-breaking highs at the end of January (1).
Sell-offs perennially spark the same debate among investors: Is this a warning sign, or a buying opportunity? For billionaire investor Thomas Kaplan, it’s definitely the latter. In a recent interview with Business Insider, Kaplan said there’s “every reason in the world” to buy gold now, arguing that the sell-off reflects routine volatility rather than a crack in the long-term case for investing in the metal.
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Kaplan isn’t a casual market watcher. He’s built much of his fortune on precious metals and has deep ties to the gold industry through his investments and leadership roles. He is chairman of the gold exploration company NovaGold (2).
That doesn’t necessarily mean you should follow his advice, though. Kaplan has clear financial interests in promoting gold. Before following a billionaire’s whims into a volatile market, investors need to understand the full picture, not just why gold’s most vocal supporters remain confident.
Why did gold slide?
President Donald Trump’s decision to nominate Kevin Warsh, whom many investors see as a safe pick, for head of the Federal Reserve helped spur a sharp downswing in the price of gold.
At the end of January, gold hit a record high around $5,500, then, the following day, the Warsh news came out and it plummeted more than 9%, its sharpest one-day drop since 1983 (3). Gold is often described as the ultimate “safe haven” asset because it isn’t tied to any single government or currency and can’t be created at will the way paper money can. Investors typically use it as a hedge against inflation, currency weakness and financial uncertainty — meaning demand tends to rise when confidence in the global economy falters.
It had been soaring in value due to stubborn inflation, Trump’s unpredictable changes in trade policy, geopolitical tensions and general all-around chaos.
Nominating Warsh changed the narrative slightly. The selection of a former Fed governor and Wall Street veteran eased concerns that Trump might seek to exert greater political control over the central bank.
Another contributor to the slide was the Chicago Mercantile Exchange (CME), which raised margin requirements for gold and silver futures contracts. Exchanges typically do this to mitigate risks when volatility in a particular market increases. This makes it more expensive for speculators to hold positions — so they sell, pushing prices down (4).
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Why Kaplan is bullish
Kaplan views gold’s recent slide as no more than short-term volatility and part of the precious metal’s normal, choppy behavior. He told Business Insider that gold’s fundamental appeal lies not in trading patterns, but in its deep structural role in a financial system burdened by high debt and ongoing monetary uncertainty — a dynamic he expects to play out over years, not weeks.
Kaplan has long said he expects ups and downs along the way, but ultimately believes gold could rise into the “tens of thousands of dollars,” because of its scarcity and value in the financial system. These, he says, are his long-term convictions, and he won’t let price dips rattle him or make him change his thesis.
When buying the dip makes sense — and when it doesn’t
Big pullbacks can tempt everyday investors to “buy the dip,” especially when a high-profile investor endorses the move. But before buying or selling any asset, you need to understand how it works, what drives demand, how it fits into your portfolio and formulate an opinion on its long-term valuation prospects.
For most investors, gold works best as a long-term diversifier or insurance asset. Research from the World Gold Council shows that the metal tends to behave differently from equities and bonds over extended periods, particularly during market stress, making it a potential buffer against large portfolio losses (5). Investors seeking diversification, or protection against inflation, geopolitical risk or currency weakness, may choose to add modestly during price dips. Even then, it’s important to understand the trade-offs.
Unlike stocks or bonds, gold doesn’t generate income, meaning returns depend entirely on price appreciation. That can leave investors disappointed during long stretches when prices stagnate or decline.
How investors gain exposure also matters. Traditional routes, such as holding physical gold or investing in the companies that mine the metal, come with drawbacks. Companies purporting to help you invest in physical gold are rife with confusing terms, aggressive sales tactics, fees that eat into returns, and sometimes outright fraud. Investing in gold companies involves additional layers of complexity and political risk related to areas of the world where gold is mined. The price of gold companies doesn’t always closely track the price of gold (6).
Gold-backed ETFs offer a simpler, more transparent option for many households — but keep an eye on the fees, and they can be high. And remember, gold is volatile (just in a different direction than most other assets), so it should be part of a diverse overall investment strategy.
Buying gold after a pullback makes the most sense when it’s approached thoughtfully as a long-term position rather than a reactive bet driven by short-term price moves or fear of missing out. For investors, holding a modest amount of gold can help reduce portfolio risk, but it’s important to understand its limitations and avoid being swayed by headlines.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CNBC (1); Business Insider (2); BBC (3); Reuters (4, (5); U.S. Commodity Futures Trading Commission (CFTC) (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.