An attendant holds 1-kilogram gold bars on Feb. 17, 2025.
Akos Stiller/Bloomberg by way of Getty Photos
Gold costs are popping. However buyers ought to avoid the temptation to chase a shiny object, funding specialists mentioned.
The SPDR Gold Shares fund (GLD), which tracks the worth of gold bullion, is up about 11% in 2025 as of two p.m. ET Tuesday. Returns are up about 42% over the previous 12 months. (Costs have been down greater than 1% on Tuesday.)
Gold futures prices are additionally up about 10% year-to-date and at the moment 36% greater in comparison with the worth a 12 months in the past.
By comparability, the S&P 500 U.S. inventory index is up about 1.5% in 2025 and 17% prior to now 12 months.
Lee Baker, a licensed monetary planner, mentioned he wasn’t getting shopper calls about gold a 12 months in the past. Now, he fields them commonly.
He thinks buyers could be clever to recollect the classic rule from Warren Buffett, “Be fearful when others are grasping, and be grasping when others are fearful.”
“It feels to me everyone seems to be beginning to get grasping because it pertains to gold,” mentioned Baker, proprietor and president of Claris Monetary Advisors, based mostly in Atlanta, and a member of CNBC’s Advisor Council.
The standard investor should not have an allocation to gold that exceeds 3% of a diversified portfolio, Baker mentioned.
Buyers enticed by lofty returns could make a knee-jerk response and purchase an enormous chunk of gold (actually or figuratively) — and, within the course of, make the frequent funding mistake of buying high and selling low, he mentioned.
“If you are going to make cash with gold that you must purchase and promote it — and hopefully promote it at proper time,” Baker mentioned. “And in case you’re getting in now, are you shopping for at a peak? I do not know.”
Why gold costs are up
Buyers typically understand gold as a secure haven in instances of turmoil and purchase the asset when there are excessive ranges of uncertainty, defined Sameer Samana, senior world market strategist and head of world equities and actual belongings on the Wells Fargo Funding Institute.
“I feel we will examine that field proper now,” he mentioned.
That mentioned, “in true instances of disaster, bonds have shone brighter than gold has,” Samana mentioned.
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Moreover, many buyers purchase gold as a result of they suppose it is a good inflation hedge, Samana mentioned. (The info doesn’t always support that funding thesis.) Buyers have been involved by latest information that implies progress on bringing down inflation may have stalled, he mentioned.
U.S. sanctions on Russia relationship to 2022 have been the “turbocharger” for gold returns over the previous 12 months or extra, Samana mentioned.
The sanctions led some central banks — in China, most notably — to purchase extra gold as an alternative of U.S. Treasury bonds to keep away from the potential problem of accessing belongings denominated in U.S. {dollars} throughout a future geopolitical battle, Samana mentioned.
That has pushed up gold demand greater in comparison with the worth a 12 months in the past — and costs with it, he mentioned.
“Do not chase” gold returns, Samana mentioned: “As a complete, you in all probability wish to maintain off on treasured metals at [current] ranges.”
Specialists do not count on gold to proceed to shine.
“There is not any motive in my thoughts gold will proceed to have a major uptrend, barring — and I definitely hope not — some kind of protracted struggle,” Baker mentioned.
Learn how to spend money on gold
Sanshandao Gold mine in Laizhou, Shandong province, China, on Jan. 17, 2025.
CFOTO/Future Publishing by way of Getty Photos
Baker recommends getting funding publicity to gold by way of a fund like an exchange-traded fund or by investing within the shares of gold mining corporations, for instance, as an alternative of shopping for bodily gold.
Funds and shares are typically extra liquid within the occasion an investor must promote the asset, Baker mentioned. Buyers with a variety of bodily gold possible have the extra problem of storing it someplace and insuring it, Baker mentioned. Insurance coverage could value buyers 1% to 2% or more of their gold’s worth per 12 months.
Just like Baker, Samana believes it could be okay for buyers to carry 1% to 2% of a well-diversified portfolio in gold.
Buyers fascinated with shopping for gold ought to take into account it as a bit of a broader commodities portfolio, which possible consists of allocations to vitality, agriculture and base metals like copper alongside treasured metals like gold, Samana mentioned.
Wells Fargo’s funding fashions have an total commodities allocation that ranges from 2% for conservative buyers to 7% for extra aggressive progress, he mentioned.
