Update, 21 October 2026: This analysis was written in November 2025; its prices, figures and outlook are as of that date. On 3 November 2026 the gold Ask was $3,954 an ounce and silver $49.90, 27% and 58% below the records both set on 29 January 2026. For the record and the crash that followed, see gold price in 2026.
The Fourth Industrial Revolution is unfolding faster than most economists predicted. Unlike previous technological disruptions that primarily affected manufacturing, today’s AI systems are replacing accountants, customer service representatives, software developers, legal researchers, and middle management, the backbone of the middle-class economy.
According to McKinsey Global Institute research, generative AI could automate 60 to 70 percent of employees’ work activities across industries. The World Economic Forum projects that by 2027, 83 million jobs will be eliminated while 69 million will be created, a net decrease of 14 million positions. Critically, eliminated jobs tend to pay higher wages than newly created positions.
This isn’t just a labor story. It’s a macroeconomic shift with profound implications for inflation, monetary policy, and asset allocation. When productivity rises while incomes fall, and corporate profits grow while consumer purchasing power erodes, some analysts argue you get the kind of environment in which gold has historically outperformed traditional financial assets. Gold rose more than 150% from early 2020 to above $4,000 per ounce in late 2025; how much of that reflected these concerns is debated.
The AI Displacement Wave Accelerates
The pace of AI-related workforce adjustments accelerated dramatically throughout 2024 and into 2025. Unlike previous downturns where companies reduced headcount due to declining revenue, current workforce reductions occur amid strong profitability with explicit acknowledgment that AI systems can perform equivalent work at substantially lower cost.
Technology companies have led the reductions, with the sector eliminating more than 260,000 positions globally in 2023 according to Layoffs.fyi tracking data. But displacement extends far beyond Silicon Valley into financial services, customer support, media, legal services, and healthcare administration.
This creates structural income compression distinct from traditional recession dynamics. Total employment might remain stable, productivity metrics improve, but median household income faces sustained downward pressure. The gap between production capacity and consumer purchasing power widens, a dynamic that historically generates significant macroeconomic instability.
Stagflation and Gold in the 1970s
Stagflation, stagnant economic growth combined with persistent inflation, represents one of the most challenging conditions for policymakers and investors. Traditional monetary policy faces a cruel dilemma: raising rates to combat inflation risks deepening economic weakness, while cutting rates to support growth risks accelerating inflation.
The original stagflation period of the 1970s saw the U.S. economy experience repeated recessions combined with inflation that peaked above 14%. This environment proved catastrophic for traditional portfolios. Stock returns were flat to negative in real terms across the entire 16-year period from 1966 to 1982, while bond investors suffered devastating losses as rising interest rates destroyed principal values.
Meanwhile, gold rose from $35 per ounce in August 1971 to $850 in January 1980, a gain of about 2,300%.
Current AI Dynamics Mirror Stagflationary Pressures
The AI-driven displacement creates conditions structurally similar to 1970s stagflation through different mechanisms:
Productivity Without Prosperity: AI boosts output per worker but doesn’t translate to wage growth for displaced workers. Corporate profits rise while household incomes stagnate.
Political Pressure for Monetary Expansion: As displacement becomes politically salient, pressure mounts for government intervention through expanded social programs, infrastructure spending, or income support, all involving substantial deficit spending.
Currency Debasement Dynamics: Governments facing technological unemployment while managing massive debt burdens face powerful incentives to tolerate higher inflation. The U.S. national debt exceeding $38 trillion (approximately 125% of GDP) creates structural pressure for inflationary policy.
On this argument, the combination of productivity growth without broad prosperity, political pressure for fiscal expansion and debt levels that encourage currency debasement could produce stagflation, the environment in which gold did best in the 1970s.
Why Gold Is Used as a Hedge
No Counterparty Risk in an Uncertain System
Perhaps gold’s most critical attribute during technological disruption is its nature as a physical asset with no counterparty risk. Unlike stocks, bonds, or bank deposits, physical gold ownership doesn’t depend on any institution’s solvency, government’s stability, or corporation’s viability.
When technological unemployment creates systemic stresses, banking instability from mortgage defaults, bond market dysfunction from debt servicing concerns, or currency crisis from fiscal expansion, gold maintains value independent of these institutional failures. The 2023 regional banking crisis demonstrated this principle when Silicon Valley Bank and others failed within weeks while gold surged as investors sought assets outside the banking system.
Fixed Supply Versus Unlimited Fiat Creation
Gold’s supply increases approximately 1.5% annually through mining, a rate that has remained stable for decades and cannot be accelerated regardless of price. This contrasts with fiat currency that can be created in unlimited quantities.
When governments face political pressure to address technological unemployment, funding must come from taxation (politically difficult), borrowing (increasingly expensive), or monetary expansion (printing money). The path of least resistance is typically monetary expansion through quantitative easing, yield curve control, or other mechanisms.
Gold bulls argue that its limited supply makes it a beneficiary: as currency units multiply while the gold stock grows slowly, each ounce is priced in more currency units. In practice gold’s price also depends on real interest rates, the dollar and investor demand, and it can fall for years while the money supply grows, as it did from 2011 to 2015.
Portfolio Diversification During Correlated Markets
Recent market behavior shows increasing correlation across traditional asset classes during stress periods. When crises hit, stocks and bonds now frequently decline simultaneously, eliminating the diversification benefit the classic 60/40 portfolio was designed to provide.
Gold maintains low to negative correlation with traditional assets, particularly during stress periods. World Gold Council research demonstrates that gold’s correlation with stocks and bonds decreases precisely when investors need diversification most. Supporters argue that if AI displacement hit both stocks and bonds, gold could be one of the few assets to hold its value; that is a scenario, not a certainty.
Central Bank Buying
Supporters also point to central bank behavior. According to World Gold Council data, central banks bought more than 1,000 tonnes of gold in 2024, the third consecutive year above 1,000 tonnes, unprecedented in the modern era.
Buying continued in 2025, at about 244 tonnes in the first quarter and 166 tonnes in the second, according to the World Gold Council.
In the World Gold Council’s surveys, reserve managers cite reasons such as gold’s performance in crises, diversification and concerns about the dollar; the surveys do not tie their buying to AI. Their choices reflect national reserve needs, which differ from an individual saver’s.
Ways Investors Hold Gold
Allocation figures quoted by financial advisers commonly range from about 5% to 10% for precious metals, and some writers argue that AI-related risks justify more. How much to hold, if any, depends on individual circumstances; this article does not recommend a percentage.
Physical Gold: Sovereign coins and bars held directly carry no counterparty risk; buyers pay a premium over spot and need to store and insure them.
Gold ETFs: funds such as GLD trade like shares and avoid storage, but the holder owns fund shares rather than metal and pays an annual fee.
Precious Metals IRAs: IRS-approved IRAs allow holding physical gold in tax-advantaged retirement accounts.
Mining stocks: shares of gold miners tend to move more than the gold price in both directions and carry company risk.
Important Considerations
Gold isn’t perfect. The metal experiences regular drawdowns of 10-20%, with occasional corrections exceeding 30%. The 2011-2015 period saw gold decline from near $1,900 to below $1,100, over 40%. Holding gold through that kind of volatility takes both money that is not needed soon and patience.
Gold generates no cash flow and typically underperforms during stable economic periods. That opportunity cost is the price of the protection gold’s holders are looking for. Physical gold is also taxed as a collectible, at a maximum 28% federal rate on long-term gains rather than the 15-20% rates for stocks; inside precious metals IRAs the account’s own rules apply instead (ordinary income on traditional IRA withdrawals, tax-free qualified Roth withdrawals).
Conclusion: AI, Stagflation and Gold
The technological displacement driven by AI adoption represents a fundamental economic shift with profound implications for employment, monetary policy, and asset performance. The scale and timing of AI-driven job losses are uncertain. Forecasts such as the World Economic Forum’s point to millions of jobs changing over the coming years, and the argument here is that this could bring pressure for more fiscal spending and monetary expansion.
Gold bulls see that combination, productivity growth that doesn’t benefit average workers, political pressure for government action, debt levels that encourage inflation and geopolitical uncertainty, as favorable for gold, and cite the 1970s, when gold far outperformed stocks and bonds during high inflation. The 1970s were not a period of technological unemployment, so the parallel is an argument rather than evidence.
Supporters describe gold not as a bet on collapse but as insurance against loss of purchasing power and systemic risk. Like any insurance, it has a cost: no income, dealer spreads and storage.
The AI revolution may create great wealth and great disruption, and no asset guarantees protection from the second. Bullion Trading LLC sells gold and silver coins and bars online and at its New York store; this article is not investment advice.