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Recent inflation has many investors asking whether gold is a smart buy. Gold can be held in several ways: physical bars or coins, ETFs and mutual funds, shares of mining companies, or futures contracts. Unlike stocks and bonds, gold does not pay dividends or interest; its value comes from broad agreement that it’s desirable and from its limited supply.
You can buy physical gold through dealers or apps that let you purchase and either take possession or pay a storage fee. Coins are sold by the U.S. Mint and dealers; bars are generally cheaper per ounce but less liquid. Some services also sell fractional bars for smaller budgets. ETFs and funds—such as SPDR Gold Shares (GLD) or closed-end trusts that allow redemption for metal—offer easy market access without storage concerns. Buying mining stocks or a miners ETF provides exposure to gold prices plus company risk; major miners include firms like Barrick Gold. Futures are available but are best left to experienced traders.
Gold’s record as an inflation hedge is mixed. There have been periods when gold rose amid low inflation and times when it lagged as prices climbed. Studies have found that real estate and Treasury Inflation-Protected Securities (TIPS) often act as more consistent inflation hedges than gold. After the U.S. left the gold standard in 1971, gold’s price surged in the 1970s and 1980s, then spent long stretches relatively flat. Overall, gold can protect purchasing power over very long spans, but its movements don’t reliably track inflation year to year.
Over long periods, stocks have outperformed gold. For many decades, broad stock indexes have delivered higher average returns than gold, making equities a better choice for growth. Gold is better viewed as a store of value or portfolio insurance than as a growth asset. It is volatile, carries extra costs (buying premiums, storage, insurance, and collectible tax treatment in some jurisdictions), and produces no cash flow, which makes its long-term expected return low compared with productive investments.
Gold’s main benefits are scarcity, durability, and long-standing acceptance as valuable. These traits support its role as a diversification tool and a hedge against extreme scenarios. Its drawbacks include storage and security risks, counterfeiting, taxation, and the potential for long periods of flat performance.
For most investors, a small, strategic allocation to gold—often in the range of 5–10% of a portfolio—is reasonable. This lets gold act as a shock absorber without sacrificing long-term growth that comes from stocks, bonds, and real assets. Choose the form of gold that fits your goals: physical metal for a safety reserve, ETFs for convenience and liquidity, and mining stocks for exposure with growth potential. Treat gold as insurance, not the engine of your portfolio’s returns.
