Should You Add Gold to Your Portfolio?

Today’s world can feel more dynamic and unpredictable than ever. Many investors are asking if gold should have a place in their portfolios. With geopolitical tension, inflationary concerns, and questions around monetary policy, gold’s appeal as a safe-haven asset has surged. However, investors should think carefully before diving in, especially when planning for long-term goals such as retirement.

Why Gold is Gaining Attention

Gold is traditionally defined as a commodity, like oil or cotton. Increasingly, its unique characteristics are placing it in the alternative investment category. Gold has enjoyed a remarkable run in 2025. According to the World Gold Council, it rose nearly 26% in the first half of the year, closing out as one of the top-performing major asset classes.

Among the factors influencing this surge are:

• A weakening U.S. dollar has ushered more investors to gold.
• Expectations of future rate cuts from central banks and low real yields (return on investment after inflation) are reducing the opportunity cost of holding a non-yielding asset like gold.
• Geopolitical tensions and trade uncertainty are fueling demand.
• Central banks continue buying gold aggressively.

These forces have helped raise the price of gold above $4,000 per ounce in 2025. According to Gregory Shearer, head of Base and Precious Metals Strategy at J.P. Morgan, “For investors, we think gold remains one of the most optimal hedges for the unique combination of stagflation, recession, debasement, and U.S. policy risks facing markets in 2025 and 2026.”

What Gold Can and Can’t Do For You

Gold offers several potential benefits, but it also has real limitations, especially for long-horizon investors.

Strengths:

• Diversification: Gold has historically low correlation with stocks and bonds, helping to dampen volatility.
• Store of value: During times of crisis or currency instability, gold can preserve purchasing power.
• Strong institutional demand: With central banks continuing to accumulate, there is structural support for gold prices.

Risks and Trade-offs:

• No yield: Gold does not generate income. Unlike bonds or dividend-paying stocks, its value is entirely dependent on price appreciation.
• Volatility: Although gold is perceived as a safe asset, its price can swing significantly.
• Dollar risk: Because gold trades in U.S. dollars, a strong dollar could undermine gold’s value.
• Cost and logistics: Physical gold carries storage, security, and insurance costs.
• Sentiment-driven: When investor sentiment shifts, so can gold prices.

How to Think About Gold in Retirement Planning

For someone focused on long-term financial goals, such as retirement, it makes sense to think of gold as insurance, rather than a core growth engine. Here’s how to approach gold using a disciplined planning framework.

1. Be clear about the objective. An investor who wants gold to act as a shock absorber during periods of volatility or geopolitical stress should align the allocation with that specific purpose.
2. Choose exposure wisely. Investors may purchase physical gold or gain access through exchange-traded funds (ETFs) or trust products, which can reduce the burden of storage and security.
3. Don’t expect stock-like growth. Because gold doesn’t generate income, it offers less compounding than equities. However, it can provide capital when risk is high.
4. Monitor macro conditions. Investors should watch trends in interest rates, inflation, and central bank activity. Those dynamics heavily influence gold’s performance.
5. Incorporate gold into a broader risk management plan. Gold can serve as a buffer in “bucket” strategies: when risk assets fall, gold may help reinforce the “safety” bucket.

When Gold May Not Be Right for Certain Investors

Buying gold is not the best choice for every scenario. It may be less appealing in the following situations:

• Those who are pursuing high growth and already have strong equity exposure.
• Those who rely on fixed or dividend income to generate cash flow.
• Individuals who avoid non-yielding assets and prefer investments that compound.

Gold can be a compelling tool, especially for those wary of inflation, policy risk, and market turmoil. However, gold’s value stems from its ability to mitigate risk, rather than generating returns. As the tragic tale of King Midas warns, it’s not good for everything to be gold. This includes the assets in one’s portfolio.

If you’re thinking of adding gold to your portfolio, consider it a complement to equities and bonds (rather than a replacement). Balancing risk and opportunity is a nuanced exercise, so it’s wise to run your plans by a financial advisor who thinks about your portfolio and retirement plan holistically. The team at SHP Financial can help you explore whether a modest gold allocation aligns with your long-term goals. Schedule your complimentary financial review with an SHP Financial advisor today and discover how gold can fit into a disciplined, resilient retirement plan.