Gold & Silver: Do They Belong in Your Portfolio?
With the Winter Olympics underway, we’re all rooting for gold! But gold has also recently captured a lot of attention from investors. After a strong run over the past year and periods of reaching new highs, the precious metal has reminded investors why it tends to resurface during times of uncertainty. Concerns about inflation, government debt levels, geopolitical tensions, and central bank policies have all contributed to renewed interest. Silver has also participated in the rally, though with even greater price swings. While headlines often focus on short-term price spikes, the more important question for long-term investors is not whether gold will go up next month, but whether it serves a purpose in a diversified portfolio.
Historically, gold has been viewed as a store of value for thousands of years. Unlike stocks or bonds, it is not tied to the earnings of a company or the creditworthiness of a government. In modern financial markets, gold has earned a reputation as a “safe haven” asset. During periods of market stress or economic instability, investors often flock to gold in search of stability. That behavior can make gold a useful diversifier. It does not always move in the same direction as stocks or bonds, which means a modest allocation may help smooth overall portfolio volatility during turbulent periods.
Gold is also frequently discussed as a hedge against inflation or currency weakness. While it is not a perfect hedge in every environment, it has historically maintained purchasing power over very long periods of time. When confidence in paper currencies declines, gold often benefits from increased demand. Silver shares some of these characteristics but behaves somewhat differently. In addition to being a precious metal, silver has significant industrial uses in electronics, solar panels, and other technologies. As a result, silver prices can be influenced both by investor sentiment and by economic growth trends, making it generally more volatile than gold.
For investors considering adding precious metals, it’s important to understand the different ways to gain exposure. The most straightforward method is purchasing physical gold or silver in the form of coins or bars. The primary advantage is direct ownership — you hold a tangible asset. For some investors, that provides peace of mind. However, you need to consider storage, potential insurance costs and dealer markups, and less convenience compared to electronic investments.
Another popular route is investing through exchange-traded funds (ETFs) that track the price of gold or silver. These funds trade like stocks and offer liquidity, transparency, and ease of purchase within a brokerage account. ETFs eliminate the need for storage and are generally cost-efficient. The tradeoff is that you do not personally hold the metal, but rather you own shares in a fund that holds it on your behalf, and you will pay an annual expense ratio.
A third option is investing in mining company stocks or mutual funds that focus on precious metal producers. Mining stocks can provide leveraged exposure to metal prices — meaning they may rise more than gold or silver when prices increase. Some also pay dividends. However, they introduce company-specific risks such as management decisions, operational challenges, and geopolitical issues in mining regions. Mining stocks tend to behave more like equities than pure precious metals and can be significantly more volatile.
As with any investment, allocation matters. Gold and silver do not generate income like bonds or dividend-paying stocks, and their long-term returns have historically lagged equities over extended periods. For most investors, precious metals are best viewed as a complementary piece of a broader strategy rather than a core holding. A modest allocation — often in the range of 5–10%, depending on individual goals and risk tolerance — may provide diversification benefits without overly concentrating a portfolio.
The bottom line is that gold and silver can serve a purpose, particularly during uncertain times. But like any asset, they should be incorporated thoughtfully, with a clear understanding of their role. When used strategically, precious metals can help balance risk — but they work best as part of a well-diversified, long-term investment plan.
