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Gold remains a popular option for investors who want a safety net or portfolio diversification. Unlike stocks or bonds, gold doesn’t pay dividends or interest. Its value comes from broad belief that it’s worth something and from its limited supply. That makes gold a “store of value” rather than an income-producing asset.
You can invest in gold in several ways. Buy physical metal as bars or coins, use an app or dealer that stores gold for you, buy shares of gold ETFs or mutual funds, own stock in gold-mining companies, or trade futures and other derivatives. Physical gold can be bought from mints or dealers, and some services let you buy fractional shares of bars if you can’t afford a whole bar. Popular ETF and fund options include SPDR Gold Shares (GLD), the Sprott Physical Gold Trust (PHYS), Invesco DB Gold Fund (DGL), and various mutual funds that include mining exposure. For miners, look at ETFs like VanEck Gold Miners (GDX) or individual companies such as Barrick Gold and Equinox Gold.
Coins and bars each have pros and cons. Coins are often easier to verify and sell; bars tend to be cheaper per ounce. Which is best depends on your goals—liquidity versus cost efficiency—and a mix of both can make sense for diversification.
Gold’s track record against inflation is mixed. There are periods when gold rose alongside inflation and other times when it moved independently or even in the opposite direction. Studies comparing assets from 1998 to 2020 found that real estate and 10-year TIPS were more consistent inflation hedges than gold, which ranked behind them. So while gold can help preserve value in extreme scenarios, it’s not a foolproof inflation hedger.
Historically, stocks have outperformed gold over long stretches. For many multi-decade periods the stock market delivered much stronger returns than gold, making stocks the better choice for long-term capital growth. Physical gold usually sells at a premium and adds storage and insurance costs, while gold investments like ETFs or mining stocks are cheaper to trade and easier to store.
Gold also has drawbacks: it can be volatile, it doesn’t produce cash flow, it’s taxed as a collectible in many jurisdictions, and it carries risks such as theft or counterfeiting. Because it offers no yield, its expected real return over very long periods is generally low compared with assets that produce income.
Cryptocurrencies have emerged as another alternative store of value. Bitcoin, for example, delivered massive gains since its early days and has attracted risk-tolerant investors seeking returns beyond the stock market. Which is better—gold or crypto—depends on your risk tolerance and goals: gold tends to be a conservative store of value with a long history, while crypto is newer and far more volatile but can offer higher upside.
A small allocation to gold—many advisors suggest roughly 5% to 10% of a portfolio—can provide ballast and diversification without sacrificing long-term growth. Treat gold as portfolio insurance rather than a primary growth asset: hold it for stability in extreme scenarios while building wealth through productive assets like stocks and real estate.
