They say all that glitters is not gold, but investors may disagree. The price of the precious metal has soared over the past year amid stock market volatility, geopolitical uncertainty and rising inflation. But does it have a place in your portfolio?
The price of gold has jumped 54 per cent in the past 12 months to $4,685 per ounce (£3,462), and over five years has risen 167 per cent.
The metal is known as a safe store of wealth because it typically holds its value when markets are rocky or traditional currencies fall in value. For these reasons, experts typically suggest it as an ‘insurance policy’.
In 2025, gold surged as central banks including Brazil, China and Turkey bought up the metal to diversify their reserves away from the weakening US dollar.
But gold is by no means a one-way bet and can be prone to swinging up and down. In the weeks after the Middle East conflict escalated, its price dropped around 12 per cent.
For this reason, experts warn against putting more than 10 per cent of your portfolio in the asset.
Unlike cash in the bank or dividend-paying stocks, gold provides no income – the only way to profit is if the price rises
Unlike cash in the bank or dividend-paying stocks, gold provides no income – the only way to profit is if the price rises – so it tends to be less popular when interest rates are higher. The simplest way to invest is through an exchange-traded fund (ETF), which is a low-cost fund that tracks the price of gold. Choose a fund that is ‘physically backed’ because this means it actually owns the metal.
Dzmitry Lipski, from Interactive Investor, suggests the iShares Physical Gold ETC, which charges 0.12 per cent a year (about £1.20 per £1,000 invested). It has closely tracked the gold price, returning 167 per cent over five years.
You can also put your money in funds that invest in gold mining companies’ shares, but these can be riskier as the companies’ fortunes tend to fluctuate with the price of metal.
Lipski warns: ‘When the price of gold rises, miners’ margins can expand faster than the metal price, potentially amplifying returns. However, this works both ways, and mining stocks tend to be more volatile during downturns.’
He suggests BlackRock Gold and General, a highly rated fund with a long-established management team. It invests in Barrick Mining, which operates across South America and Africa, and Colorado-based Newmont Corporation. The fund has returned an impressive 183.4 per cent over five years. The Jupiter Gold & Silver fund spreads its investments away from just gold. Silver is a cheaper metal – in demand for its many uses from electric cars to semiconductor chips – but can be more volatile. Over one year its price is up 153 per cent to £37.80 an ounce.
The Jupiter fund’s top holdings include Toronto-based silver miner Discovery Silver and Fresnillo, one of the largest mining firms in the world. The fund is up 171.3 per cent over five years. Some investors might prefer the idea of owning physical gold. Rick Kanda, of The Gold Bullion Company, says: ‘When you buy physical gold, you own the metal outright. Most funds only provide exposure to the gold price, rather than genuine ownership.’
You can also put your money in funds that invest in gold mining companies’ shares, but these can be riskier
If you invest in physical gold, be sure to buy it from a legitimate source. Websites such as The British Numismatic Trade Association (BNTA) and the London Bullion Market Association (LBMA) list reputable dealers. Read reviews and be wary of deals that seem too good to be true.
Forget gold bars and start with coins, Kanda suggests. A key benefit is that certain coins are classed as currency, so any profit is not liable for capital gains tax. ‘They are also easier to sell in smaller, affordable increments,’ he adds.
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Consider storage and insurance. Companies such as the Royal Mint allow buyers to keep gold in their vault – this is safer than having it at home but comes at a price. The Royal Mint charges 1 per cent of the value plus VAT. Bear in mind that, unlike a fund, gold bars may take time to sell and a dealer may take a slice of the profit.
The real question is: after such a strong run, has gold got further to climb? Lipski says: ‘Central bank buying, higher government debt levels and ongoing global tensions could be good for the gold price. But if inflation eases and interest rates stay higher, it could weaken.’
Kanda is optimistic about the outlook, he says: ‘JPMorgan’s research team has a target price of around $5,000 per ounce by the fourth quarter of 2026, with $6,000 viewed as a realistic possibility longer term.’
