Gold () futures opened at a record $4,348.10 per ounce on Friday, up 1.2% from Thursday’s close of $4,280.20. In early trading, the price of gold rose as high as $4,392 before pulling back slightly. The price of gold futures has increased by over 62% from one year ago.
This latest gold surge follows a warning from JPMorgan CEO Jamie Dimon about credit losses related to the bankruptcy of subprime auto lender Tricolor Holdings. Dimon’s comment, “when you see one cockroach, there’s probably more,” indicated broad concern about the quality of commercial credit. Two regional banks also recently announced credit issues, and allegations of questionable accounting have surfaced in relation to bankrupt auto parts supplier First Brands. Jefferies Financial Group (JEF) had exposure to First Brands’ debt.
Rising credit quality fears drove investors to gold, which is widely recognized as a safe-haven asset for uncertain economic times.
The opening price of gold futures on Friday is up 1.6% from Thursday’s close of $4,280.20 per ounce. Friday’s opening price is up 9.9% from the opening price of $3,957 one week ago on October 10. In the past month, the gold futures price increased 18.5% compared to the opening price of $3,669 on September 17. Over the past year, gold is up 62.4% from the opening price of $2,677.40 on October 17, 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 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.
Learn more: Gold alternatives? How to invest in silver, platinum, and palladium.
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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