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With recent high inflation, many investors are asking whether gold is a good place to put their money. This article covers the main ways to invest in gold—physical bars and coins, ETFs, and mining stocks—explains whether gold protects against inflation, and lists the pros and cons of holding physical gold.
What gold is and how it differs from other assets
Gold has long been seen as a store of value. Unlike stocks or bonds, it doesn’t produce income through dividends or interest. Its worth comes from a broad agreement among people, institutions, and governments that gold is valuable, and from its limited supply. That shared belief lets gold hold or gain value even though it generates no cash flow.
A key turning point came in 1971 when the U.S. ended the dollar’s convertibility into gold, effectively ending the gold standard. That move removed gold’s built-in role in controlling inflation. Afterward gold jumped in price in the 1970s and 1980s, then largely traded flat for much of the next two decades. While gold can help diversify a portfolio, it typically returns less than stocks over long periods.
Ways to invest in gold
– Physical gold: You can buy bars or coins from dealers or platforms and either take possession or pay a firm to store them for a fee. Some apps let you buy fractional ownership of bars if you can’t afford a full bar.
– Gold coins: Available from official mints or private dealers. Coins are easy to sell and often easier to authenticate than some bars, but they usually carry a premium.
– Gold ETFs and mutual funds: ETFs like SPDR Gold Shares (GLD) offer an easy, low-cost way to track the price of gold. Other funds include Invesco DB Gold Fund (DGL) and the Franklin Gold and Precious Metals Fund (FKRCX). Closed-end trusts such as Sprott Physical Gold Trust (PHYS) can sometimes be redeemed for physical metal. Fidelity’s precious metals fund (FSAGX) covers mining and other related areas.
– Gold mining stocks and funds: Buying miners or an ETF like VanEck Gold Miners ETF (GDX) gives exposure to companies that produce gold. Examples of big miners are Barrick Gold (GOLD) and Equinox Gold Corp. (EQX).
– Futures and other derivatives: Contracts to buy or sell gold at a future date are complex and suit sophisticated traders; learn how futures work before using them.
Coins vs. bars
Neither is universally better. Coins tend to be more liquid and easier to verify, while bars are often cheaper per ounce. For many investors, a mix works best. If you want physical exposure but lack funds for a full bar, fractional options are available through some platforms.
Does gold hedge inflation?
The relationship between gold and inflation is mixed. Gold has risen in value during some periods with little or no correlation to inflation; at times it has even moved opposite to inflation. Geopolitical events and investor sentiment can drive gold prices independently of inflation. Studies covering long spans—such as one by Bloomberg and the World Gold Council from 1998 to 2020—found that real estate and 10-year TIPS were more consistent inflation hedges than gold, with gold often ranking behind them.
Returns, volatility, and role in a portfolio
Think of physical gold as a safety net—preserving wealth rather than growing it. Over long stretches, the stock market has outperformed gold. The S&P 500 returned about 11.93% annually over the last 50 years (as of November 2025) with dividends reinvested, while gold returned about 6.93% annualized over the same period.
Physical gold usually sells at a premium and often carries storage and insurance costs. It’s taxed as a collectible in the U.S., which can mean rates up to 28%—higher than typical long-term capital gains rates. Gold can also be volatile, and unlike stocks, it offers no cash flow to justify that risk. For many investors, the risk/reward profile of gold is less attractive than equities.
That said, a small allocation of gold can reduce overall portfolio volatility. Many advisors suggest keeping speculative or alternative assets, including gold, at 5%–10% of a portfolio. That provides ballast during downturns without significantly hindering returns when stocks and bonds rise.
Gold versus cryptocurrency
Cryptocurrencies like Bitcoin are a newer alternative to gold. Bitcoin began trading at a fraction of a dollar in 2009 and has delivered massive price swings and strong returns for early holders. For context, one bitcoin was worth $0.09 in 2009. By October 26, 2025 it reached a peak of $114,472 and was trading at $84,848 on November 21, 2025. Over the same span, gold closed 2009 at $1,104 and was trading around $4,096 in November 2025. Crypto can offer higher potential returns but also much higher uncertainty. Choose between them based on your goals and risk tolerance.
Pros and cons of physical gold
Pros:
– Long history as a store of value
– Low counterparty risk if you hold the metal yourself
– Can diversify and reduce portfolio volatility
Cons:
– No income or cash flow
– Premiums, storage and insurance costs
– Tax treatment as a collectible can be unfavorable
– Risks of loss, theft or counterfeiting
Bottom line
Gold makes sense as a limited, strategic part of a diversified portfolio—think of it as insurance rather than a growth investment. Use stocks, real estate, and other productive assets to build long-term wealth, and keep a small allocation to gold if you want protection against extreme events, currency loss, or simply an alternative store of value.
