Does Gold Belong in a Retirement Portfolio?

Published on 18 June 2024 at 01:23
A golden egg cracking open to reveal a diverse retirement portfolio with various assets such as stocks, bonds, real estate, and of course, gold. Each asset is represented by a different symbol or icon to highlight the importance of diversification. The ba

Get ready for a big shock: gold prices have gone up a lot. They started at about $400 per ounce in the late 20th century. Now, they're up to a huge $2,326 per ounce as of June 2024. The real question is – should you have this precious metal in your retirement portfolio? As people try to figure this out, advisors and experts are talking. They're discussing if gold is a good asset class for the long run or if it's just a way to deal with ups and downs in the market.

Many find investing in gold exciting. But, its title as a commodity puts its real value in doubt. Not like stocks and bonds, physical gold doesn't create dividends or a steady income. Its price mostly comes from how much people want it. Learning about gold's special features is key as you work on diversifying your portfolio.

Key Takeaways

  • Gold prices have soared, reaching $1,840 per ounce in February 2023, but its role in retirement portfolios remains a topic of debate.
  • As a commodity, gold's value is largely driven by market demand rather than intrinsic utility, making it a volatile investment.
  • While gold can act as a hedge against market volatility, financial advisors caution against allocating a significant portion of retirement assets to it.
  • Diversification with assets like stocks, bonds, and real estate may provide more stable and reliable growth for long-term retirement goals.
  • Any exposure to gold should be limited and carefully balanced within a well-diversified portfolio aligned with your risk tolerance and investment horizon.

Understanding Gold as an Investment Asset

Investing in precious metals puts gold way up high. Gold isn't like stocks or bonds. Its worth comes from being a long-time store of value. This means it's special for people looking to spread out their investments.

Gold's Unique Place Among Commodities

Gold is a bit unique even in the commodity world. Generally, its price doesn't follow the usual rules of supply and demand. Instead, it moves with how investors feel and the broader economy. This creates its unique role as a safe choice for many.

retirement portfolio with gold pie chart

The Historic Role of Gold as a Store of Value

Gold has been at the heart of trading and saving for thousands of years. Partly because it's rare and strong, it became an early form of money. Even today, it's seen as a wealth symbol and a way to protect savings.

Gold's Volatility and Lack of Fundamental Value

Unlike companies or real estate, gold's worth doesn't come from something solid like earnings. Instead, it's about what people think it's worth. This can change a lot based on feelings, the economy, or even news about gold itself.

Gold can go up in value over time. But its changing worth makes it risky for those who want steady growth. So, it's not the best pick for retirement money aiming for safety.

Does Gold Belong in a Retirement Portfolio?

Deciding to add gold to your retirement savings is both complicated and risky. Many people think of gold as safe, a good hedge against inflation and stock changes, but it's not always steady. Its value can go up and down, making it not the best choice for long-term savings.

Gold's Counter-Cyclical Properties

Gold often does well when the stock market falters. It becomes more valuable when things are uncertain, making it appear safer to investors. This could help balance out losses in your retirement account if the market drops.

A golden compass pointing upwards as a reflection of rising prices in a retirement portfolio

Gold's Volatile Price Swings

Gold's value can change a lot over just a short time. For example, from 2011 to 2014, the price of gold went from $1,400 to nearly $1,900. Then, it dropped back to $1,200. This kind of quick change can be bad for those looking for steady growth in their savings.

Comparison with Other Asset Classes

Over time, stocks and real estate can show better or as good results as gold, but usually without the big ups and downs. For diversifying, things like high-quality bonds might give you some protection if the market goes down, but with fewer risks and no need for special storage.

A small amount of gold might help balance your savings in hard times. But, financial planners warn against putting too much in because it's not always certain. For most people saving for retirement, mixing stocks, bonds, and other common investments is a safer bet for the future.

Ways to Include Gold in a Retirement Portfolio

When you think about diversifying your retirement portfolio, there are many ways to add gold as a hedge. You can own physical metals. Or, you can invest in funds or companies that mine gold. Each way has its own costs and risks.

Physical Gold Ownership

Buying physical metals means you can hold gold bars or coins. It's a good part of a retirement investment strategy. But, it can cost more than the gold's market value.

If you keep the gold somewhere safe, you will need to pay storage fees. Talking to financial advisors can help you decide the best way to include gold in your plans.

Gold Funds and ETFs

Another way is to invest in funds or exchange-traded funds (ETFs). These can be easier to buy and sell. But, you don't own the gold directly.

Some funds are considered collectibles by the IRS. This means you might pay higher taxes. Plus, they might have fees that can lower your earnings. Unlike stocks, these funds don't pay dividends.

Investing in Mining Companies

You could also buy stocks of companies that mine gold. This way might offer higher return chances. But, it comes with more risks.

These stocks might not go up when the stock market falls. So, they may not help as much with diversification as owning gold itself.

In the end, picking how to include gold should be thought over well. Consider the costs and what it might mean for your retirement investment strategy.

Precious Metal IRAs: A Specialized Option

A precious metal IRA lets you invest in gold, silver, palladium, and real estate. These investments are not allowed in normal IRAs. You have to pick an IRA custodian to keep your metals safe. These IRAs have the same yearly limit as regular IRAs.

a secure and locked vault with golden bars and coins inside, surrounded by a diverse portfolio of investments such as stocks, bonds, and real estate. The image should convey the idea that precious metal IRAs can be a specialized but valuable option for re

Eligible Precious Metals for IRAs

For your IRA, you can have gold, silver, platinum, and palladium. They must be very pure, like 99.5% gold. You can own coins like American Eagles and bars from certain places. But, you can’t own collectible coins in these IRAs.

Considerations and Limitations

These IRAs can cost more because of storage, insurance, and fees. You can't keep the metals at home. And, there are specific rules about when and how you take out the money.

Putting 5-10% of your retirement money into metals is usually enough. This is because metal IRAs can be risky and don’t generate income. The fees are also higher than with other IRAs.

It's good to choose a trusted custodian and dealer for your precious metals. When you want to take out money, it can be in metal or cash. But, there might be taxes and penalties.

Diversification and Asset Allocation with Gold

Financial advisors say to keep gold and precious metals at 5-10% of your retirement savings. Gold does spread risk. But too much can make your overall savings dance up and down and slow down its growth. Stocks, however, have often given more by growing as the economy does.

Recommended Allocation to Gold

Diversifying your investments is smart for managing how risky they are. Putting 5-10% of your money into gold is a good idea. This leaves room for things like stocks, which can earn you money over time. Gold can help balance out the ups and downs of your other investments because it tends to move the other way during tough economic times.

But adding too much gold can swing your investment's value a lot. This might slow down how fast your money grows. Also, when you sell gold you've had over a year, you might pay a tax that's up to 28%. That's more than what you'd pay from selling stocks or similar things.

Gold as a Hedge Against Inflation

Treasuries, or TIPS, are good for fighting off inflation with less bouncing value than gold. Still, gold often gains value when inflation goes up and the dollar weakens. This makes gold a favorite for some investors.

Gold acts like a fortress when the economy's shaky. It fights off inflation and keeps your money safe. Many people choose gold during political unrest because it stays valuable. It's also pretty easy to turn gold investments into cash. Compared to real gold, paper investments tied to gold are simpler to cash in on. This gives you more ways to manage your investments wisely.


Adding a bit of gold to your retirement account could help mix up your investments. It might protect your savings when times are tough. Yet, most advisors say it shouldn't be your main investment for the years after work. That's because gold can be risky and doesn't make money like stocks or bonds do.

The price of gold has really shot up in the last 20 years, especially in the early 2000s. But from 2011 to 2014, its price changed a lot. It went from about $1,400 per ounce to almost $1,900, then dropped to about $1,200. Then, from 2020 to 2023, it was between $1,700 and $2,000, with no steady rise.

A small amount of gold in your retirement plan might be a good idea. It could keep your investments safe when the economy is not doing well. But, putting too much in gold is not wise. Why? It doesn't earn money like other investments do. Plus, it usually doesn't do as well as stocks or good quality bonds over time.


What is the historic role of gold as a store of value?

Gold has been valued for thousands of years due to its special properties. It's used for making coins and was key to many monetary systems. Even though we don't use the gold standard, gold is still seen as a way to keep and grow wealth over time.

Why is gold's price so volatile?

The value of gold is mainly driven by what people are willing to pay. This is because it doesn't have direct utility like other assets. Thus, its price can change quickly based on feelings and not just on financial factors.

How does gold's performance compare to other asset classes?

Historically, stocks, real estate, and bonds have shown better growth than gold. They are also less risky. While gold can add variety to a portfolio, high-quality bonds offer similar benefits without the management or storage issues.

What are the ways to include gold in a retirement portfolio?

To invest in gold, some may buy physical gold like bars or coins. Others might prefer buying shares in funds that track gold's price. Either way, it can be a part of a well-rounded retirement plan.

What is a precious metal IRA?

A precious metal IRA is unique and lets investors put their retirement money into metals. To set one up, you pick a custodian that will keep your metals safe in a special facility.

What is a recommended allocation to gold in a retirement portfolio?

It's usually wise to keep gold at around 5-10% of your investments. Too much gold might make your overall investment riskier without as much potential for growth.

Can gold act as a hedge against inflation?

Gold can protect your money from losing value when prices go up a lot over time. However, things like TIPS might be a better choice as they're less likely to change in value suddenly.

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