Gold is a safe-haven asset, meaning it often increases in value when the economic outlook is uncertain. That behavior appeared in 2025, as gold surged to record highs amid trade tensions and geopolitical conflicts. In more predictable times, however, gold’s behavior can be less appealing. It pays no interest, and its value can remain flat for extended timeframes.
Effective gold investing requires knowing how to capitalize on its strengths and mitigate its weaknesses. The four-step gold investing process outlined here walks through key decision points to set you up for success.
Read more: What to know before buying gold, silver, or platinum from Costco
Gold has characteristics that differentiate it from stocks, bonds, and cash. Before you begin the investing process, you must understand pricing models and the distinct investing risks.
Gold has different levels of pricing. Three to know are the spot price, the spot price plus the gold premium, and the gold futures price.
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Gold spot price. The gold spot price applies to physical gold, sold wholesale or as a raw material. The spot price represents the value of one troy ounce of pure physical gold for immediate delivery. A troy ounce is a precious metals measurement that’s slightly heavier than a standard ounce.
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Gold spot price plus the gold premium. Finished gold, such as coins, bullion, or jewelry, is priced above the spot price. The markup on the spot price is known as the gold premium. It covers things like marketing and profits for dealers and refiners.
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Gold futures price. The futures price applies to contracts between gold buyers and sellers. These contracts require the buyer and seller to trade gold for cash at a future date for a specified price. As with the spot price, the futures price represents one troy ounce of gold.
Like any investment, gold has risks. It can lose value after you buy it, in predictable and unpredictable ways. Gold can also underperform relative to other assets. This creates an opportunity cost issue – that is, your portfolio suffers because you have money invested in gold that could have been used to buy a more productive asset.
Investing in gold can also introduce fraud risk. The SEC regulates publicly traded gold investments, including gold-backed ETFs and gold mining stocks. The Commodity Futures Trading Commission oversees gold futures trading. But neither agency oversees physical gold transactions. Unfortunately, that creates space for gold-related scams. For example, dealers may take advantage of unsuspecting buyers by selling counterfeits or transacting at prices unrelated to market values.
Learn more: Thinking of buying gold? Here’s what investors should watch for.
If you’re ready to begin the gold investing process, setting your goal is the first step. Defining why you’re investing is important with any new investment asset. Having a goal helps you make better decisions, especially when performance falls short of expectations. This is particularly true for alternative assets like gold that behave differently from stocks, bonds, and cash.
Three suitable investing goals for a gold position are:
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Diversification into an asset that moves independently from stock prices. Gold’s headlining characteristic is its ability to hold its value, or even appreciate when other assets are falling. Investors often use this behavior as a stabilizer. They rely on gold’s strength in tenuous climates to offset limit unrealized losses in equities.
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Protection against inflation-related loss of purchasing power. Gold’s reputation as a store of value also makes it a popular inflation hedge. In 2025, Morgan Stanley CIO Mike Wilson recommended a gold allocation for investors wanting protection from rising prices.
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Backup source of value and wealth in an unlikely economic collapse. Because gold holds value, it can serve as a medium of exchange if the dollar collapses. In this respect, “gold is an insurance policy” against economic calamity, according to Scott Travers, author of The Coin Collector’s Survival Manual and editor of “COINage” magazine.
Learn more: How to start investing: A step-by-step guide
Allocation is the composition of your portfolio across different types of assets, such as stocks, bonds, and gold. Setting a target allocation for each asset type helps you control risk over the long term. This is because asset values change over time. Stocks appreciate, for example. Unless you periodically rebalance your holdings to restore the target allocation, the appreciation can leave you over-concentrated in equities.
Travers recommends holding 5% to 15% of your net worth in gold. Other experts advise going as high as 20% if you are risk-tolerant. A review of gold’s historic behavior in light of your risk appetite should help you identify the right allocation percentage.
Learn more: Track gold’s historical price here
Historically, gold has shown extended upcycles and downcycles. The precious metal was in a growth phase from 2009 to 2011. It then trended down, failing to set a new high for nine years.
The price of gold began rising again in the second half of 2023. This growth phase is fueled by central bank demand, a weaker U.S. dollar, geopolitical conflict, and an uncertain U.S. economic outlook. As of the fourth quarter of 2025, analysts remain bullish on gold as these factors persist.
Gold can drive strong portfolio gains, but the growth is not sustainable over the long-term. In the lackluster years for gold, your position will negatively impact your overall investment returns. If that feels problematic, a lower allocation percentage is more appropriate. On the other hand, you may be willing to accept gold’s underperforming years so you can benefit more in the good years. In this case, you can target a higher percentage.
Yahoo Finance video: Gold investing: Why ETFs can be the best way to go
Remember, too, that your target allocation includes the value of the gold you already own. Travers recommends checking your jewelry box before buying more gold. Given gold’s sharp rise in value over the past 12 months and more, your gold jewelry may be worth more than you think.
Travers warns against selling your jewelry to buy gold coins because you will pay dealer fees on both transactions.
Once you define your target gold allocation, you must choose a form of gold to hold. Four options are physical gold, gold mining stocks, gold ETFs, and gold futures contracts.
Physical gold includes jewelry, gold bars, and gold coins. The advantages of physical gold include:
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Peace of mind. If you keep your physical gold at home, it is available to use as a medium of exchange in an economic emergency.
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No added volatility. Gold mining stocks tend to rise and fall with gold prices, but business-related factors enhance their volatility.
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Tax advantages available with gold IRAs. You can hold physical gold in a traditional or Roth gold IRA. These accounts typically charge storage, transaction, and other fees, but taxes on realized gains are deferred.
Learn more: Gold IRA: Benefits, risks, and how it differs from a traditional IRA
The disadvantages of physical gold include:
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Risk of theft or loss. Physical gold must be properly secured. Whether you store it in your home or with a depository, gold can be stolen. In October 2024 , a federal jury found Robert Leroy Higgins guilty of fraud charges after $50 million worth of precious metal disappeared from his business, First State Depository.
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Lower liquidity. Physical gold is less liquid than stocks or ETFs. To convert your gold to cash, you have to locate a dealer and pay a markup on the sale.
Owning shares in gold mining stocks provides indirect gold exposure. The advantages of mining stocks over physical gold include:
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Greater liquidity. Large-cap gold mining stocks like Barrick Mining Corporation (B) and Franco-Nevada Corporation (FNV) generally enjoy a narrow bid-ask spread, which is a sign of liquidity. The bid-ask spread is the difference between what buyers will pay and what sellers will accept.
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Easy to store. Stocks live in your brokerage account and do not consume physical space. In normal times, this is an advantage. In an economic catastrophe, this could be a disadvantage if brokers or the stock market are temporarily shut down.
Learn more: The top-performing companies in the gold industry
The disadvantages of gold mining stocks include:
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Greater volatility. Since 2000, gold mining stocks have risen and fallen faster than gold spot prices. And in recent years, gold mining stocks have trended down even as gold has gained value.
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No utility as a medium of exchange. Gold mining stocks can appreciate, but they have no direct utility as a medium of exchange.
Gold ETFs are funds that invest in gold mining stocks or physical gold. Their advantages include:
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Easy to store. Like gold mining stocks, ETF shares are digital assets with no storage requirements.
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Greater liquidity. Shares of the most popular gold ETFs, like SPDR Gold Shares (GLD), are heavily traded, which implies good liquidity.
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Tied directly to gold prices. ETFs backed by physical gold can be less volatile than gold mining stocks or gold mining ETFs.
Two disadvantages of gold-backed ETFs over physical gold are:
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Fund fees. Funds charge fees, which dilute returns over time. For context, the expense ratio of SPDR Gold Shares is 0.40%. This translates to $4 in fees annually for every $1,000 invested.
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No utility as a medium of exchange. As with gold mining stocks, you probably cannot use ETF shares to trade for food in an economic emergency.
Understanding gold futures
Gold futures are standardized contracts to purchase gold on a future date at a specific price. The contracts often represent 100 troy ounces.
Trading gold futures can be a diversification strategy, but it’s more commonly associated with speculation and hedging. Speculators seek to profit from gold price changes without owning and storing the physical metal. Hedgers are usually regular gold buyers — like jewelry makers — who want to lock in prices to improve their financial visibility.
After a futures contract expires, you can settle it with cash or by taking physical delivery of the gold. A cash settlement involves a credit or debt for the contract’s value at expiration. Physical delivery occurs at approved depositories with 100-ounce gold bars or three 1-kilo gold bars. Switzerland is a primary gold refining hub and major supplier of 100-ounce and 1-kilo gold bars to the U.S.
The advantages of gold futures are:
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Leverage. You can control a large amount of gold with a low capital outlay.
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Convenience. You don’t need to store physical gold to earn from its price changes.
The disadvantages of investing in gold futures are:
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Risk. Leverage amplifies gains and losses, and gold can be an unpredictable asset.
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Complexity. The complexity of futures contracts can be off-putting to many retail investors.
After selecting the size and form of your gold investment, consider your investment timeline as a final suitability check. Gold can be volatile. It has also demonstrated extended periods of decline. Those behaviors are not acceptable if your timeline is short. The risk is too great that gold’s price will be down when you need to liquidate.
An extended holding period also provides greater potential for reaching your goals. As an example, hedging against stock market declines or inflation is a long-term effort. These outcomes will continue to be risks as long as you own stocks or cash deposits. Holding gold as insurance against an economic calamity requires you to keep the asset until you need it.
A small gold position can act as a stabilizer for your stock portfolio and your purchasing power. If you choose physical gold stored at home, it can also stand in as currency in the worst of economic crises. Just know that gold has underperformed stocks in the past, so choose your target allocation accordingly.
Tim Manni edited this article.
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