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Gold prices hit a historic milestone this week, topping $4,000 an ounce for the first time.
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Economic uncertainty and geopolitical tensions have sent investors flocking to the safe-haven asset.
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But with prices at all-time highs, how much should you hold? Here’s what the pros say.
The gold rally is one of the biggest stories in markets this year.
The precious metal surged past $4,000 per ounce for the first time this week, but with the latest records, it’s natural to wonder how much you should be holding in your portfolio.
Gold’s reputation as an inflation hedge and a hedge against wider macro and geopolitical risks has made it attractive to investors this year. In an unusual twist, the price of the metal has risen alongside stocks, which are also near record highs.
In July, hedge fund legeng Ray Dalio said that investors should allocate roughly 15% of their portfolios for either gold or bitcoin. Investing professionals speaking with Business Insider said that’s probably a sensible allocation.
“We think investors should hold at least 15% of their portfolio in gold as a replacement for other fixed income assets,” David Miller, CIO of Catalyst Funds and the portfolio manager of Strategy Shares Gold Enhanced Yield ETF, said. “Global demand remains strong, supply growth is constrained, and real yields remain historically low, all of which support higher gold prices.”
Will Rhind, CEO of GraniteShares, a fund with $11 billion in assets under management, isn’t quite as bullish, but he thinks a sizable allocation to gold is a good bet, even with prices at records.
“For a diversified portfolio, we typically see clients with allocations of somewhere between 7%-10% in gold. That number will, of course, vary significantly depending on factors such as the client’s investment goals, risk tolerance, and general economic outlook,” he noted.
From Rhind’s perspective, a key to deriving value from gold investments is holding enough for it to be a relevant position in the portfolio, and a 1% allocation won’t be enough to impact a portfolio’s performance in a meaningful way.
Other experts believe slightly less than the 7% threshold makes the most sense.
“We believe that a 5% allocation to gold is a valuable addition to a classic long-term portfolio of stocks and bonds,” said Alexander Lis, the chief investment officer of Social Discovery Ventures.
The risk of holding too much gold is that the conditions it’s expected to hedge against never materialize, and that investors now may be too pessimistic about the wider debasement trade that’s gripped the market.
