An attendant holds 1-kilogram gold bars on Feb. 17, 2025.
Akos Stiller/Bloomberg by way of Getty Photographs
Gold costs are popping. However buyers ought to keep away from 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 yr. (Costs have been down greater than 1% on Tuesday.)
Gold futures costs are additionally up about 10% year-to-date and presently 36% larger in comparison with the worth a yr in the past.
By comparability, the S&P 500 U.S. inventory index is up about 1.5% in 2025 and 17% up to now yr.
Lee Baker, an authorized monetary planner, mentioned he wasn’t getting shopper calls about gold a yr in the past. Now, he fields them repeatedly.
He thinks buyers could be smart to recollect the traditional 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, primarily based 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 might make a knee-jerk response and purchase a giant chunk of gold (actually or figuratively) — and, within the course of, make the widespread funding mistake of shopping for excessive and promoting low, he mentioned.
“If you are going to generate profits with gold it’s essential to purchase and promote it — and hopefully promote it at proper time,” Baker mentioned. “And in the event 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 believe we are able to verify 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 does not all the time assist that funding thesis.) Buyers have been involved by latest information that implies progress on bringing down inflation might have stalled, he mentioned.
U.S. sanctions on Russia relationship to 2022 have been the “turbocharger” for gold returns over the previous yr 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 larger in comparison with the worth a yr in the past — and costs with it, he mentioned.
“Do not chase” gold returns, Samana mentioned: “As a complete, you most likely wish to maintain off on treasured metals at [current] ranges.”
Specialists do not anticipate gold to proceed to shine.
“There isn’t any purpose in my thoughts gold will proceed to have a big uptrend, barring — and I definitely hope not — some kind of protracted battle,” Baker mentioned.
spend money on gold
Sanshandao Gold mine in Laizhou, Shandong province, China, on Jan. 17, 2025.
CFOTO/Future Publishing by way of Getty Photographs
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 seemingly have the extra problem of storing it someplace and insuring it, Baker mentioned. Insurance coverage might value buyers 1% to 2% or extra of their gold’s worth per yr.
Just like Baker, Samana believes it could be okay for buyers to carry 1% to 2% of a well-diversified portfolio in gold.
Buyers taken with shopping for gold ought to take into account it as a chunk of a broader commodities portfolio, which seemingly 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.