Markets are driven by emotion, primarily fear and greed. They fall when investors worry and rise when they rush to secure a profit. While experienced traders can use financial instruments to profit from this volatility, for many investors, a falling market means declining wealth. In these moments, they turn to safe-haven assets as a buffer against uncertainty. This article explores the relationship between market fear, as measured by the VIX index, and gold’s role as a premier safe-haven asset, especially in light of the significant market events of 2024 and 2025.
Measuring market volatility – The VIX index
The best way to measure expected volatility in the US stock market is the CBOE Volatility Index, or VIX, often called the “Fear Index”. The VIX tracks the price of options derived from the S&P 500 index, which represents 500 major US companies.
Options give investors the right, but not the obligation, to buy or sell shares at a set price on a future date. They are often used as an ‘insurance policy’ to hedge against adverse price movements. When investors are fearful of sudden or large market changes, they are willing to pay more for this insurance. By tracking the price of these options, the VIX provides a picture of how volatile investors expect the market to be over the next month. A high VIX indicates widespread fear and uncertainty, while a low VIX suggests a calmer, more stable outlook.
A Tale of Two Spikes: VIX from 2020 to 2025
The VIX provides a clear historical record of market fear. During the COVID-19 pandemic, it surged to its all-time highest closing value of 82.69 on March 16, 2020. This surpassed even the peak of 80.86 seen during the 2008 financial crisis.
After a period of relative calm, with the VIX closing at just 13.20 on January 2, 2024, volatility made a dramatic return. On April 8, 2025, the VIX spiked to 52.33 following a sudden escalation in U.S. tariff policy and retaliatory measures from China, which triggered a global equity sell-off. This sharp rise served as a stark reminder that extreme volatility can return swiftly. Despite these spikes, major banks like JPMorgan and UBS forecast the VIX to average a more moderate 16-20 for 2025, though they acknowledge that risks remain elevated.
The VIX and gold
While there is not a perfect one-to-one correlation, a strong relationship exists between the VIX and gold. As a premier safe-haven asset, gold typically attracts significant demand when market fear rises. The events of 2025 exemplify this perfectly. As geopolitical and economic uncertainty drove the VIX higher, gold was simultaneously propelled to a new nominal record high of $3,896.49 per troy ounce on October 2, 2025. This demonstrates its enduring value as a portfolio protector during periods of high anxiety.
Why Buy Gold In 2025?
Discover how physical gold investment compares to other investment assets for growth and protection.
Why Gold Reached Record Highs in 2025
Gold’s surge to record highs in 2025 was driven by a powerful confluence of factors. A primary structural driver has been sustained, large-scale purchasing by the world’s central banks, which bought a net total of 1,045 tonnes in 2024—the third consecutive year they have added over 1,000 tonnes to their reserves.
This strong demand floor was amplified by several key market dynamics:
- Expectations of lower US interest rates: Anticipation of the US Federal Reserve cutting rates makes non-yielding gold more attractive compared to bonds.
- US dollar weakness: A softer dollar makes gold cheaper for foreign buyers, increasing its appeal.
- Geopolitical and trade policy uncertainty: Conflicts in Europe and the Middle East, alongside trade-policy shocks, have driven significant safe-haven flows into gold.
- Renewed investor demand: A revival in investment demand, including inflows into gold-backed ETFs, has further fuelled the rally.
Leading banks like J.P. Morgan and UBS have raised their end-2025 price targets, with forecasts ranging from $3,100 to as high as $3,800 per ounce, reflecting a strong structural bull case for the metal.
Gold – the opportunity to benefit from volatility
Physical gold does more than just protect your portfolio from market declines; it creates strategic opportunities. Because gold bullion is easily and quickly liquidated, it can be sold to free up capital when stock markets are low. This allows savvy investors to purchase undervalued stocks and other assets, using their gold holdings as a launchpad for growth when the market recovers.
Of course, timing is key. Gold provides a stable long-term investment in a diversified portfolio, acting as a reliable buffer against volatility in an uncertain world.
Building a Resilient Investment Strategy
Having a strong physical gold base to your portfolio provides a stable platform from which to navigate today’s volatile environment. With UK inflation running at 3.8% as of August 2025, the real value of cash is eroding. Furthermore, the FSCS cash deposit protection limit remains at £85,000, leaving larger sums exposed in the event of a bank failure.
Holding a tangible asset that is immune to inflation and counterparty risk is a critical component of long-term wealth preservation. This solid foundation allows you to make other investment decisions with greater confidence, knowing your core capital is secure.
Your Partner in Precious Metals Investment
Navigating these markets requires expertise. The Pure Gold Company offers a uniquely consultative service to help you make the best investment choices for your specific goals. Our in-house specialists provide tailored, one-to-one guidance to help first-time and experienced investors alike build resilient portfolios with physical gold and silver. We empower our clients to protect and grow their wealth with confidence.
