4 Things To Do When the Price of Gold Skyrockets
Written by
Jacob Wade
Edited by
Zuri Anderson
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The price of gold seems to be hitting new all-time highs every week.
Gold investors are sitting pretty, with gold prices rising over 35% over the last 12 months alone, and now trading at over $3,300 per ounce.
But whether you own gold already, or are wondering if now is a good time to invest, there are a few things you should do when the price of gold skyrockets.
1. Review Your Investments
If you’ve got gold in your portfolio (or even gold ETFs), it’s a good idea to take a look at your investment balances when gold jumps in price. For most investors, gold is a small part of their overall portfolio, and gold jumping in price can boost portfolio returns compared to other assets.
Over the last 20 years, gold prices have outperformed the S&P 500, according to Curvo. If you don’t have any gold in your portfolio, you might be thinking of adding some. With gold at all-time highs, you might be hesitant to add gold right now — and you might be right. Zooming out further, gold prices have a history of dropping when markets are doing well and political tensions calm down.
It can be worth potentially adding gold over time by dollar-cost averaging into gold or gold ETFs. This lets you purchase while gold prices are high, and scoop up more gold if prices drop as well.
2. Rebalance Your Portfolio
If you hold any gold in your portfolio, it might be a good idea to rebalance your portfolio to see why gold jumps significantly in price. Ideally, you’ll have a chosen asset allocation for your portfolio, including defining what percentage of your portfolio is allocated toward gold.
For example, if you have a $100,000 investment portfolio and want to allocate 10% of your portfolio toward gold, that means you should have about $10,000 worth of gold in your investment accounts. But with the price of gold increasing, you might end up with $15,000 worth of gold, meaning your portfolio is now 15% gold.
The process of rebalancing your portfolio involves selling investments that you hold too much of (overweight assets), and buying investments that you hold too little of (underweight assets). So if you now hold too much gold in your portfolio compared to your chosen asset allocation, you’d sell some gold to buy something you hold too little of.
For example, if you now hold $15,000 in gold (15%), you’d sell $5,000 worth of gold and use the proceeds to purchase other investments (such as stocks and bonds). This brings your gold asset allocation back to 10% of your portfolio, and brings the asset allocation of other assets back in line with your preferences.
Note: Buying and selling investments within a taxable brokerage account can trigger capital gains taxes, so speak with your tax advisor before rebalancing your portfolio.
3. Consider Gold ETFs
Buying and storing physical gold can be expensive (shipping costs, insurance, storage fees, etc.), which is why gold ETFs have become so popular. Whether or not you already own physical gold, it may be a good idea to add gold ETFs to your investment portfolio.
Gold ETFs are investments that are backed by physical gold. You do pay a slightly higher fee to hold gold ETFs than most stock market ETFs, but it can still be cheaper than buying and storing physical gold.
Also, while most retirement accounts don’t allow you to hold physical gold inside them, gold ETFs are available in any investment account. This means you can purchase gold in a tax-advantaged account and allow it to grow (tax-free) as part of your retirement planning.
A few popular gold ETFs include:
- SPDR Gold Shares (GLD)
- iShares Gold Trust (IAU)
- abrdn Physical Gold Shares ETF (SGOL)
- iShares Gold Trust Micro (IAUM)
4. Other Investments To Consider
While Gold becoming popular can boost your portfolio if you’re already a gold investor, it can also be a sign that the economy is in turmoil or political tensions are high. Gold typically rises in price when other markets are unstable, and investors flock to gold as a “safe haven asset.”
If gold prices are on the rise, this could also mean that the broader stock market might see volatility. In this case, you may want to consider other “safe haven” investments to protect your portfolio.
Stocks that typically perform well during market volatility include consumer staples, health care and utilities. These stocks are companies that produce products and services that are required for everyday living, such as access to food, hospitals and home utilities like electricity and water. Adding these investments while gold prices are high can stabilize a volatile portfolio even more.
More From GOBankingRates
