"Gold has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end." – Warren Buffett
In 2025, gold’s surge has captured widespread attention, driven by a nearly 10% decline (see chart below) in the U.S. dollar (USD), with the U.S. Dollar Index (DXY) falling from approximately 110 in January to about 97.8 by early September [1].
Source: Morningstar Direct, 9/11/2025
This dollar weakness, one of the steepest drops since 1991, has pushed investors toward gold, but its limitations as a hedge against falling stock markets and inflation, along with its lack of cash flow, make it less compelling than overseas stocks, which can also benefit from a falling dollar [2]. International equities, often under the radar compared to gold’s glitter, offer currency appreciation, cash-generating businesses, and a more reliable inflation hedge. In this post I’ll examine the dollar’s decline, gold’s shortcomings, and why international stocks are an overlooked opportunity.
Reasons for the Dollar’s Weakness in 2025
The USD’s 10% YTD decline reflects factors suggesting reduced confidence in U.S. economic stability [3]:
• Policy and Trade Disruptions: Tariffs and trade disputes have unsettled global markets, prompting a dollar sell-off as overseas investors call into question U.S. economic leadership [4].
• Fiscal Challenges: Growing U.S. fiscal deficits and national debt have raised concerns about long-term sustainability, pressuring the dollar [5].
• Monetary Policy Uncertainty: Questions about Federal Reserve actions, including potential interest rate changes, have weakened the dollar’s safe-haven status, despite periods of rising U.S. interest rates [6].
These dynamics have fueled gold’s rise this year and projections estimating an average price of $3,675 per ounce by Q4 [7].
Gold’s Limitations as an Investment
Gold’s rally is largely tied to the weaker USD, as it takes more dollars to buy an ounce (gold is priced in dollars and the weaker the dollar the more the price of gold may go up). However, gold has significant drawbacks:
• Inconsistent Stock Market Hedge: Gold does not reliably protect against falling stock markets. During past bear markets, it has sometimes declined alongside equities as investors sell for liquidity [8].
• Limited Inflation Protection: Gold often fails to keep pace with inflation in the short term, underperforming assets like Treasury Inflation-Protected Securities (TIPS). Its 2025 gains are driven more by currency dynamics than inflation hedging [9].
• No Cash Flow: Gold generates no income or dividends, relying solely on price appreciation based on market sentiment and supply-demand dynamics.
These limitations make gold a less effective option compared to alternatives that offer both defensive and growth potential. See below chart on the long-term total returns of various asset classes and notice gold keeps up with inflation but has not delivered the compound returns that stocks do.
Source: Siegel, Jeremy, Stocks for the Long Run (2014), With Updates to 2023. Past Performance is not indicative of future results. Stocks: The total returns after inflation on the broadest index of stocks available at the time. (Stocks-real-total return index: 1802-2022). Bonds: the total returns on an index on U.S. government bonds after inflation. (Bonds-real-total return index: 1802-2022. Bills (total returns on U.S. Treasury Bills after inflation. (Bills-real-accumulative index: 1802-2022). Gold: The value of $1 of gold bullion after inflation. (Gold-real-price index: 1802-2022). Dollar: The purchasing power of one U.S. dollar. (Money: 1802-2022). Index performance assumes reinvestment of dividends, but does not reflect any management fees, transaction costs or other expenses that would be incurred by a portfolio or fund, or brokerage commissions on transactions in fund shares.
Advantages of Overseas Stocks
International equities, often overshadowed by gold’s headline-grabbing run, provide a stronger alternative through currency appreciation, ownership in cash-generating businesses, and better inflation resilience.
Currency Benefits from a Weak Dollar
A declining USD increases the value of assets denominated in foreign currencies, such as euros or yen, in dollar terms. The dollar’s 10% YTD drop has boosted returns on international investments for U.S. investors [10]. In 2025, non-U.S. stocks have outperformed U.S. equities [11] by over 10%, see chart below.
Source: Morningstar Direct, 9/11/2025
Returns from Productive Businesses
Unlike gold, overseas stocks represent ownership in companies that can generate earnings and dividends, driving compounding returns. In 2025, international stocks have matched or exceeded U.S. equities’ double-digit gains, with global ETFs in high-growth sectors showing strong performance [12]. These businesses provide a dynamic source of value beyond price appreciation.
Stronger Inflation Hedge
Stocks, particularly those of companies with pricing power, can serve as a more reliable inflation hedge than gold. During inflationary periods, companies can often raise prices to offset increased costs, preserving or expanding profit margins. This adaptability allows stocks to better maintain real value compared to gold, which lacks operational flexibility and depends on market-driven price increases [13]. Overseas stocks in regions with robust economic activity are particularly well-positioned to capitalize on this dynamic.
Portfolio Considerations in a Weak Dollar Environment
Gold’s 2025 surge has drawn significant attention, but its unreliable hedging against stock market declines and inflation, combined with its lack of income generation, limits its appeal. International stocks, often underappreciated compared to gold, offer a more effective way to navigate a weak dollar environment through currency appreciation, cash-flow-producing assets, and stronger inflation resilience. At RetirePath Advisors, we maintain a strategic weight in international stocks and have recently upgraded our view in the past quarters with recent additions to the asset class.
The Dollar’s Decline and Reserve Currency Status
Lastly, despite the US Dollar’s 2025 decline, I wanted to point out that it is unlikely to lose its status as the world’s reserve currency (see charts below). The dollar still accounts for the largest share of global foreign currency reserves, approximately 58% as of recent data, and dominates international transactions, with about 48% of SWIFT payments (a way banks around the world send money to each other quickly and securely) conducted in USD [14]. It also represents a significant portion of global GDP and remains the primary currency for pricing commodities like oil and metals. These entrenched roles ensure the dollar’s continued prominence, even amidst temporary weakness [15]. The US Dollar’s role in the global economy is here to stay.
Summary
In 2025, gold’s surge is driven by a 10% USD decline, as a weaker dollar increases the number of dollars needed to buy an ounce. However, gold’s limitations—no cash flow, unreliable stock market and inflation hedging—make it less appealing than international stocks. Overseas equities benefit from a falling dollar through currency appreciation, generate income from productive businesses, and offer a stronger inflation hedge by adjusting prices and margins. Despite the USD’s weakness, its role as the world’s reserve currency remains secure due to its dominance in reserves, transactions, and commodity pricing. International stocks, often overlooked, are a compelling way to navigate this environment.
References
[1] U.S. Dollar Index (DXY) performance, 2025.
Source: https://www.marketwatch.com/investing/index/dxy
[2] Gold price performance, 2025.
Source: https://tradingeconomics.com/commodity/gold
[3] Historical USD performance analysis, 1991-2025.
Source: https://www.macrotrends.net/1329/us-dollar-index-historical-chart
[4] Impact of tariffs and trade disputes on USD, 2025.
Source: https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/
[5] U.S. fiscal deficit and debt trends, 2025.
Source: https://www.cbo.gov/publication/60870
[6] Federal Reserve policy and USD impact, 2025.
Source: https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20250618.htm
[7] Gold price projections, Q4 2025.
Source: https://www.jpmorgan.com/insights/global-research/commodities/gold-prices
[8] Gold performance during equity bear markets, historical data.
Source: https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart
[9] Gold vs. TIPS in inflationary periods, historical analysis.
Source: https://blogs.cfainstitute.org/investor/2024/06/05/gold-and-inflation-an-unstable-relationship/
[10] Currency impact on international investments, 2025.
Source: https://www.schwab.com/learn/story/will-weak-dollar-enhance-international-returns
[11] Non-U.S. stock performance by sector, 2025.
Source: https://www.msci.com/research-and-insights/blog-post/five-takeaways-for-country-investing-from-2025-historic-equity-shift
[12] U.S. and international ETF performance, 2025.
Source: https://www.etf.com/sections/features/10-best-performing-international-etfs-2025
[13] Stocks as an inflation hedge, historical analysis.
Source: https://blogs.cfainstitute.org/investor/2021/07/19/myth-busting-equities-are-an-inflation-hedge/
[14] Share of USD in global foreign currency reserves and SWIFT transactions, recent data.
Source: https://www.federalreserve.gov/econres/notes/feds-notes/the-international-role-of-the-u-s-dollar-2025-edition-20250718.html
[15] USD role in global GDP and commodity pricing, 2025.
Source: https://www.federalreserve.gov/econres/notes/feds-notes/the-international-role-of-the-u-s-dollar-2025-edition-20250718.html
Disclosures
This material is provided for informational purposes only and is not solely intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The views and strategies described may not be suitable for all investors. They also do not include all fees or expenses that may be incurred by investing in specific products. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. The opinions expressed are subject to change as subsequent conditions vary. Advisory services offered through Thrivent Advisor Network, LLC.
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.
The U.S. Dollar Index – known as USDX, DXY, DX and USD Index – is a measure of the value of the United States Dollar (USD) against a weighted basket of currencies used by U.S. trade partners. The index will rise if the Dollar strengthens against these currencies and fall if it weakens.
The MSCI ACWI (Morgan Stanley Capital International All Country World Index) Ex-U.S.® Index is a stock market index comprising of non-U.S. stocks from 22 developed markets and 24 emerging markets.
The MSCI (Morgan Stanley Capital International) USA Index is designed to measure the performance of the large and mid cap segments of the US market. With 626 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in the US.