Are artificial intelligence (AI) and Magnificent 7 stocks in a bubble? We’ve been seeing more and more headlines lately speculating that a crash could be imminent, and while we don’t hold the same opinion, we do believe that prudent risk management demands that investors consider allocating to risk-off assets, including gold and silver.
Like AI stocks, precious metals look overbought; but unlike AI stocks, they’re structurally underinvested. As such, we believe they deserve another look.
Valuations Overextended
In case you’ve been living around a rock, AI has dominated both public markets and venture capital flows. According to PitchBook, more than 55% of global venture funding this year has gone to AI, with giants like OpenAI, Anthropic and xAI receiving the lion’s share.
In the public markets, Nvidia, Microsoft and their Mag 7 peers have carried the Nasdaq and S&P 500 to repeated all-time highs, while equal-weight indices lag far behind.
Valuations are stretched. The S&P’s forward price-to-earnings multiple sits near 23 right now, on the higher end of the spectrum.
Billionaire hedge fund manager Leon Cooperman told CNBC last week he thinks we’re at the stage of the bull market that Warren Buffett cautioned about; namely, irrational exuberance appears to be in control, not fundamentals. The so-called Buffett indicator—the ratio of total U.S. market cap to gross national product (GNP)—surged past 200% last week, meaning equities are now valued at more than double the size of the U.S. economy.
None of this guarantees a crash is coming, of course. But if you lived through the internet frenzy of the late 90s, we might have some idea what can happen when investor capital collects too narrowly in a handful of names. If an AI pullback happens, it could be sharp.
Gold and Silver Still Under-owned
That brings us to gold and silver, which just posted a historic third quarter. Gold surged 17% to $3,840 an ounce, its largest quarterly dollar gain on record, according to the Wall Street Journal. Silver jumped nearly 30% to $46.25, its biggest quarterly percentage gain ever, and just shy of its 1980 peak, when the Hunt brothers notoriously tried to corner the global silver market.
Remarkably, precious metals remain deeply underrepresented in portfolios. In a report dated September 25, Bank of America strategists point out that gold makes up a measly 0.4% of private client assets and 2.4% of institutional assets.
Gold Miners Back in Favor
The rally hasn’t been limited to physical bullion. Bloomberg reports that gold mining stocks collectively raised $6.7 billion in equity in the third quarter alone, the highest quarterly total on record.
Major offerings from Hong Kong’s Zijin Gold, China’s Shandong Gold and Indonesia’s Merdeka Gold are leading the rally.
We was pleased to see that Bank of America named gold miners its number one investment theme of 2025, ahead of uranium, defense tech and even AI. That’s a huge endorsement in a year when tech and AI have dominated the news.
Gold in a Diversified Portfolio
We would be remiss if we didn’t mention that gold and silver are flashing overbought signals right now, whether viewed through standard deviation or the 14-day relative strength index (RSI). Historically, such moves have preceded pullbacks.
Even if precious metals roll over, the losses could be smaller and shorter-lived than a potential AI crash. Hypothetical stress tests conducted by the World Gold Council (WGC) found that adding gold to a diversified portfolio reduced declines by 50 to 90 basis points across scenarios ranging from equity crashes to credit squeezes.
Accessing the Opportunity with GOAU
Investors seeking to gain exposure to the gold and precious metals sector might consider the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSE: GOAU). Launched in 2017, the GoGold ETF, as we sometimes call GOAU, is designed to capture the performance of companies in both the active production and passive ownership of precious metals, through a Smart Beta 2.0, rules-based strategy.
What makes GOAU stand out is its focus on high-quality producers and royalty companies—firms with strong balance sheets, sustainable profitability and disciplined capital allocation even when metal prices are down. Unlike traditional miners, which might face exorbitant operational costs, royalty and streaming companies provide upfront financing to mining projects in exchange for a share of future production at a fixed price.
The GoGold ETF’s index, the U.S. Global GO GOLD and Precious Metal Miners Index (GOAUX), selects companies that derive at least 50% of their revenues from precious metals and weights them using both market capitalization and fundamental factors such as valuation, profitability and operating efficiency. Its top holdings include industry leaders such as Franco-Nevada, Wheaton Precious Metals and OR Royalties, all of which have long histories of prudent capital management and consistent dividend growth.
For investors looking to completement their portfolios with gold exposure while maintaining focus on quality and efficiency, we believe GOAU offers a thoughtfully constructed, cost-effective solution.
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