Gold’s Rising Value: A Cautious Perspective
Gold has certainly caught the eye of investors lately, especially with its current record prices. However, before adding it to your portfolio, it might be wise to pause and consider that historically, gold tends to lag behind stocks and other asset types in terms of long-term performance.
“While the allure of gold is undeniable, the returns can be quite complex,” noted Pat Baird, a certified public accountant and co-founder of Baird Harris Wealth Management in Dallas. “For more than 30 years, compound interest has consistently come out on top,” he added. Interestingly, Baird Harris Wealth Management is positioned at No. 3 on CNBC’s 2025 Top 100 Financial Advisors list.
Gold’s Unpredictable Returns
Spot gold has recently surpassed $4,000 per ounce for the first time. By Tuesday’s close, it had risen 51.6% since the start of the year. Experts believe there’s potential for further increases, particularly due to ongoing government shutdowns, anticipated interest rate cuts, and heightened geopolitical tensions.
Goldman Sachs analysts suggest that prices could reach up to $4,900 an ounce by late 2026, according to a note published recently. Nevertheless, when looking back over the thirty years leading to September, gold’s annualized total return was just 7.96%, as per Morningstar Direct data. In comparison, the S&P 500 stocks delivered a total return of 10.67%, and real estate showed 8.89%.
Baird emphasized a historical preference for equities as a more reliable hedge against inflation. He mentioned that, during periods of significant economic strain and budget deficits, gold might see spikes, but these are far from guaranteed. “If you’re going to accept that level of volatility in your portfolio, investing in something more profitable makes sense,” he suggested.
Mark Millsberger, CPA and CEO of Dana Investment Advisors, also points out that other forms of investment typically outshine gold. “Our belief persists that a diversified, balanced portfolio that incorporates various asset classes, beyond just gold and fixed income, is the way to go,” he mentioned. He further noted that equities have a history of offering good protection against inflation, providing both earnings growth and dividends—features that gold simply lacks.
The Allure of Gold in Economic Downturns
Gold prices recently surged above $3,900 an ounce, spurred by a weaker yen and safe-haven buying amidst the U.S. government shutdown, also fueled by growing expectations of further interest rate reductions from the Federal Reserve.
Ray Dalio, founder of Bridgewater Associates, advised investors at a recent economic forum to consider allocating up to 15% of their portfolios to gold. He drew parallels to the 1970s, a time when precious metals soared amid uncertainty, inflation, overwhelming government spending, and significant debt. “Gold tends to perform well when traditional investments falter,” Dalio said.
With the ongoing government shutdown lasting into its second week and gold prices peaking, Sameer Samana from Wells Fargo Investment Institute affirmed that the trend remains strong. Gold is often regarded as a protective measure during recessions and in periods marked by low interest rates and financial instability.
Investing in Gold: Expert Recommendations
Experts frequently recommend gaining exposure to gold through exchange-traded funds that reflect the price of physical gold, advocating this approach as part of a well-rounded investment strategy, rather than buying physical gold items directly. Samana remarked that this method tends to be the most practical for most investors.
Despite gold’s impressive climb, financial advisors usually advise keeping exposure to gold at a minimal percentage of one’s portfolio. “We’ve always included it in several of our portfolios, though not in large quantities,” said John Mullen, president and CEO of Parsons Capital Management, currently ranked No. 1 among CNBC’s Top 100 Financial Advisors. Mullen echoed a generally favorable outlook on gold’s prospects, suggesting that it may continue to rise.
Mullen acknowledged that although his stance differs from Dalio’s proposed 15%, gold’s presence in their portfolios has gradually increased due to the fiscal challenges in Washington, “We’re likely up a few percentage points, still within single digits, mainly through investments in gold-backed ETFs and mining stocks,” he shared.
Baird’s firm maintains a strategic allocation of up to 10% across various alternative investments for clients, but noted, “gold is not on that list.”
