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Investors often turn to gold when inflation rises. Unlike stocks or bonds, gold doesn’t produce income through dividends or interest; its value rests on broad agreement that it’s scarce and desirable. That reputation makes it a “store of value,” but it also means gold behaves differently from productive assets and typically lags stocks over long periods.
You can get exposure to gold in several ways: buying physical bars or coins, owning shares of gold ETFs or mutual funds, investing in mining companies, or trading futures and other derivatives. Physical gold can be purchased through dealers, the U.S. Mint, or apps that buy, store, and sometimes let you take possession of the metal. Popular ETFs and funds include SPDR Gold Shares (GLD), Invesco DB Gold Fund (DGL), Franklin Gold and Precious Metals Fund (FKRCX), Sprott Physical Gold Trust (PHYS), and Fidelity Select Gold Portfolio (FSAGX). For mining exposure, there are funds like VanEck Gold Miners ETF (GDX) and individual stocks such as Barrick Gold and Equinox Gold. Futures contracts exist but are best left to experienced traders.
Coins and bars each have advantages. Coins tend to be more liquid and easy to verify, while bars usually carry lower premiums per ounce. If you can’t afford a full bar, some platforms offer fractional ownership. Keep in mind physical gold typically carries a purchase premium, storage and insurance costs, and sometimes extra fees for authentication or delivery.
Gold’s relationship with inflation is mixed. Historical data show periods when gold rose with inflation and other times when the two diverged; geopolitical events and investor sentiment often influence prices more than consumer-price changes. Research comparing hedges from 1998 to 2020 found real estate and 10-year TIPS to be more consistent inflation hedges than gold, which ranked third.
Historically, gold has been better as a form of insurance than as a growth investment. Over long stretches, stocks have outperformed gold—by a substantial margin in many eras—so gold is more appropriate for conservative investors seeking stability or a portfolio diversifier than for those focused on capital appreciation. Physical gold can serve as a worst-case-scenario asset, while ETFs and mining stocks offer easier trading and lower storage burdens.
Gold’s supply characteristics—finite and durable—support its long-term appeal, but valuing gold purely by industrial use would suggest it’s expensive. That helps explain why value investors often avoid it. Gold also has drawbacks: it produces no cash flow, can be volatile, may sit flat for years, is taxed as a collectible (subject to higher tax rates), and requires secure storage. These factors mean its long-term expected return is modest compared with yield-bearing or equity investments.
Cryptocurrencies present a newer comparison. Bitcoin, for example, began at fractions of a dollar in 2009 and later experienced massive gains—often outpacing gold over the same period—but with much higher volatility and uncertainty about long-term adoption. Whether gold or crypto is a better choice depends on your goals and risk tolerance: crypto for high-risk, high-reward speculation; gold for a time-tested store of value.
For investors considering alternatives and speculative holdings, a modest allocation—often suggested in the 5–10% range—helps provide ballast without derailing long-term growth objectives. Small allocations to gold can reduce overall portfolio volatility, but avoid treating it as a primary growth vehicle.
Physical gold presents additional risks like theft, loss, and counterfeiting (for example, tungsten cores). Many of these issues can be mitigated through reputable custodians or dealer services that offer storage and verification for a fee. Ultimately, treat gold as portfolio insurance: hold it in limited, strategic amounts while building wealth primarily through productive assets like stocks, real estate, and bonds.
