Historical Role of Gold
Gold has served as a store of value for thousands of years. It has maintained purchasing power across generations while currencies have come and gone. This track record is one reason investors consider gold for long-term holdings. For broader context, see this guide to investing in gold.
However, past performance does not guarantee future results. Gold does not produce income like stocks or bonds. Its value depends entirely on what others are willing to pay for it.
Portfolio Diversification
Some investors hold gold because its price often moves independently of stocks and bonds. During periods of market stress, gold has sometimes held value or risen while other assets declined. This lack of correlation can reduce overall portfolio volatility.
The appropriate allocation to gold, if any, depends on your individual circumstances. Common allocations range from 5-15% of a portfolio, but there is no universally correct amount. If you decide to build a position gradually, consider dollar cost averaging as a systematic approach.
Costs and Considerations
Physical gold involves costs that paper investments do not. You pay premiums when buying and accept spreads when selling. Storage and insurance add ongoing expenses. These costs reduce your net return compared to the change in spot price.
Gold also produces no dividends or interest. Your return comes entirely from price appreciation. In periods when gold prices are flat or declining, you may experience negative real returns after accounting for inflation and costs.
Making Your Decision
Whether 1 oz gold bars fit your situation depends on your goals, timeline, risk tolerance, and existing portfolio composition. Gold can serve different purposes: wealth preservation, diversification, or simply peace of mind from holding tangible assets.
Consider consulting a financial advisor who can evaluate your complete financial picture. This content is educational and should not be taken as investment advice.