Gold (GC=F) futures opened at $3,990.10 per ounce on Friday, up 1.1% from Thursday’s close of $3,946.30. Friday’s opening price is 1.5% below gold’s all-time high price of $4,049.20, achieved Wednesday.
Gold’s slight pullback follows confirmation of a ceasefire and hostage release in the conflict between Israel and Hamas. The deal is a first step towards ending the war that began on Oct. 7, 2023. Meanwhile, the U.S. government remains closed due to a budgeting disagreement between Republicans and Democrats. Democrats have argued for healthcare concessions, which Republicans say they won’t address in the government funding bill. The shutdown has delayed key economic reports on employment, though the Bureau of Labor Statistics will reportedly release a September inflation report in October. The central bank meets on interest rates on Oct. 28 and 29. Investors widely expect a quarter-point rate reduction.
The ceasefire in the Middle East lessens gold’s importance as a safe-haven asset, but the ongoing U.S. government shutdown and potentially lower interest rates could support higher gold demand.
The opening price of gold futures on Friday is up 1.1% from Thursday’s close of $3,946.30 per ounce. Friday’s opening price is up 3.5% from the opening price of $3,855.20 one week ago on October 3. In the past month, the gold futures price increased 10.1% compared to the opening price of $3,625 on September 10. Over the past year, gold is up 53.3% from the opening price of $2,602.50 on October 10, 2024.
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Learn more: Gold vs. crypto: Which should investors own in debasement trade?
A gold investment can add stability and inflation protection to your portfolio. But it can also dilute your gains when stock prices are rising quickly. Finding the right balance between gold’s diversification benefits and profiting from growth potential in other assets can be challenging.
Even the experts are divided on how to achieve the correct balance. Below, five experts explain their recommended gold allocations, which range from 0% to 20%.
Robert R. Johnson, professor at Creighton University’s Heider College of Business, does not advocate gold investing. In his words, “while having a small position in precious metals may dampen portfolio volatility in the short-run, the tradeoff between slightly dampened volatility and the lost long-term return is certainly not a prudent one, particularly for Gen Z/millennials with long investing time horizons.”
Brett Elliott, director of content and SEO at American Precious Metals Exchange (APMEX), recommends setting an allocation that aligns with your investing goals.
Growth-oriented investors may be comfortable with an allocation of 10% or 15%, according to Elliott. But income investors will prefer a smaller position, because gold provides no yield. A 2% to 5% gold allocation can provide some resiliency without an excessive drag on income potential.
Blake McLaughlin, executive vice president at Axcap Ventures, said historical data support a gold allocation of 5% to 8%. “Gold may not offer the outsized return potential of private investments, but the metal holds a set of attributes that are increasingly hard to ignore,” according to McLaughlin. Those attributes include the metal’s resilience amid economic uncertainty and geopolitical unrest.
Thomas Winmill, portfolio manager at Midas Funds, believes most investors will benefit from a long-term gold allocation of 5% to 15%. Winmill specifically advocates investing in gold mining companies through a mutual fund.
Your risk tolerance and current mix of financial versus hard assets can guide you to an appropriate allocation, according to Winmill.
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Risk tolerance. Keep your allocation percentage low if you tend to panic in volatile cycles.
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Financial vs. hard assets. Financial assets are stocks and bonds. Hard assets include tangible items like real estate, gold, collectibles, classic cars, and equipment. If you have no home equity and your wealth is primarily in financial assets, you can set your gold allocation higher. Or, if your home is paid for and more valuable than your stock portfolio, gold investing may not be necessary.
Vince Stanzione, CEO and founder at First Information, recommends a 20% gold allocation, specifically in physical gold or a gold ETF. Stanzione argues for a higher exposure to gold as a wealth protection strategy. As he says, “gold keeps with inflation and gold retains its purchasing power,” while paper currencies are devaluing around the world.
Whether you’re tracking the price of gold since last month or last year, the price-of-gold chart below shows the precious metal’s steady upward climb in value.
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