Should You Buy Gold Now?

Gold is having a moment. Prices have surged to fresh record highs in late September 2025, fueled by a cocktail of falling interest-rate expectations, safe-haven demand, and powerful central-bank and ETF buying. On September 29, spot gold touched an all-time high near $3,833/oz as investors weighed U.S. government-shutdown risk, a softer dollar, and the prospect of further Federal Reserve rate cuts after its September trim.

That backdrop can make gold feel like a no-brainer. But like any asset, it comes with genuine trade-offs. Below is a clear, no-hype guide to owning gold right now—what’s driving the price, the advantages, the pitfalls, and practical ways to add it to a portfolio without regrets.

A quick snapshot of today’s market

• Prices at records. Gold set multiple new highs in September, extending a year-to-date run above 40%. Near-term drivers include safe-haven flows amid geopolitical tensions and U.S. fiscal worries, plus a weaker dollar.
• Rates matter—and they’re moving. The Fed cut rates by 25 bps on Sept. 17 and signaled it will “carefully assess” further adjustments—supportive for gold because the metal pays no interest (lower cash and bond yields reduce gold’s opportunity cost).
• Structural demand is strong. Central banks have been persistent net buyers (over 1,000 tonnes in 2024 and continued healthy purchases in 2025), while global gold ETFs have swung to multi-month inflows in Q2/Q3.
• ETF flows are surging. Analysts highlight unusually heavy ETF participation alongside central-bank demand as a key reason prices have pushed into uncharted territory.

The case for owning gold

1) Crisis insurance and diversification

Gold often rallies when risk assets wobble. In 2025, headlines tied to geopolitics and U.S. fiscal brinkmanship have stoked safe-haven buying and pushed the metal higher. Even modest allocations (e.g., 2–10%) can improve a portfolio’s resilience by adding an asset that’s historically less correlated with stocks and (at times) with bonds.

2) Tail-risk hedge against currency and policy shocks

Central banks—especially in emerging markets—keep accumulating gold as a non-defaultable reserve diversifier. That same logic can help individuals hedge extreme dollar risk, debt concerns, or policy missteps. Persistent official-sector buying provides a structural bid under the market.

3) Potential inflation hedge (with nuance)

Over very long horizons, gold has tended to hold purchasing power, and many investors view it as part of an inflation-hedging basket. While short-term relationships are noisy, elevated inflation or falling real yields tend to be supportive.

4) Benefit from falling interest rates

When the Fed eases, the opportunity cost of holding a zero-yield asset falls. The latest cut and expectations for more have been important pillars of 2025’s rally.

5) Liquidity (if you choose the right vehicle)

Major gold ETFs (such as GLD) and futures trade with deep liquidity and narrow spreads, letting you scale exposure quickly or pair it with stop-loss or options strategies. (Check each fund’s historical data, AUM, and spreads to evaluate fit.)

The case against (or at least, the cautions)

1) No cash flow, inherently hard to “value”

Gold doesn’t produce earnings or dividends. That means you’re relying on price appreciation driven by macro variables (real rates, the dollar, risk sentiment) and flows (ETFs/central banks). When those winds shift, gold can stall for long stretches.

2) Inflation-hedge limits in the short run

Research shows gold’s inflation-hedging power is strongest in certain regimes and countries, and less reliable over shorter windows. If you need precise CPI-matching over 1–3 years, TIPS or other hedges may be more targeted.

3) Volatility and drawdowns—even from highs

Buying into momentum can work, but it also increases the risk of sharp reversals, especially if rate-cut bets fade, geopolitical tensions ease, or ETF inflows slow. Several prior peaks were followed by multi-month consolidations.

4) Premiums, storage, and security (for physical)

Coins and bars trade above spot (the “premium”), which can widen in hot markets. You’ll also need secure storage and possibly insurance. If you sell back to a dealer, expect a bid/ask spread that eats into returns.

5) Taxes can bite

In the U.S., physical gold and many gold-backed ETFs are taxed as “collectibles,” with a top federal rate up to 28% on long-term gains—higher than long-term stock gains for many investors. (Tax treatment varies by vehicle and jurisdiction; always confirm before you buy.)

6) Concentration and timing risk

Because gold’s drivers are macro and sentiment heavy, large allocations magnify your exposure to a single theme (real rates/safe-haven demand). Timing that perfectly is difficult.

Ways to own gold (and how they compare)

Physical bullion (coins and bars)

• What it is: Direct ownership of metal in your hand or in a vault.
• Pros: No counterparty risk, tangible asset, potential privacy.
• Cons: Premiums, storage/insurance cost, logistics, wider spreads.
• Best for: Long-term “disaster insurance,” people who value tangibility, those comfortable with vaulting.
• Tips: Favor widely recognized coins (American Eagles, Canadian Maple Leafs) for easier resale; compare dealer premiums; plan storage before you buy.

Gold ETFs

• What it is: Exchange-listed funds that track the gold price (often backed by vaulted bullion).
• Pros: Highly liquid, easy to buy/sell, low carrying cost vs. physical, suitable for tactical allocation.
• Cons: Usually taxed as collectibles in the U.S.; small expense ratio; fund structure adds custodial layers (read the prospectus).
• Best for: Core exposure in brokerage accounts, rebalancing, option overlays.
• Context now: ETF inflows have been a notable tailwind in 2025.

Miners (equities and ETFs of miners)

• What it is: Shares of companies that produce gold.
• Pros: Operating leverage—miners can outperform spot in bull runs; dividends possible; equity tax treatment.
• Cons: Company-specific risks (costs, jurisdiction, hedging, management), equity-market beta, often more volatile than bullion.
• Best for: Investors comfortable with stock risk seeking torque to the theme.

Futures and options

• What it is: Derivatives listed on exchanges (e.g., COMEX) for leveraged exposure or hedging.
• Pros: Capital efficiency; precise sizing; income strategies (options).
• Cons: Leverage cuts both ways; margin calls; contract roll costs.
• Best for: Experienced traders with risk controls.

How much gold belongs in a diversified portfolio?

There’s no single “right” number, but many diversified, long-only portfolios land in the 2–10% range, scaled to risk tolerance and goals. Conservative investors might lean nearer 2–5% as crisis insurance; tactical investors may flex higher when real yields fall or macro risks rise. Always size it so you can sleep at night through inevitable swings.

Practical buying framework (today)

1. Define your job for gold. Is it disaster insurance? A tactical rate-cut play? A structural diversifier? Your why determines vehicle and size.
2. Pick the instrument that matches that job.
   • Long-term insurance → physical + secure storage.
   • Liquid core exposure → bullion-backed ETFs.
   • Leverage/hedging → futures/options (if experienced).
3. Scale in, don’t “all-in.” With prices at records, staged entries (e.g., thirds or monthly DCA) can reduce regret if there’s a pullback.
4. Mind the macro signposts. Watch real yields, the Fed path, dollar trends, ETF flows, and central bank buying. Recent records were linked to expectations of more rate cuts, a softer dollar, and continued inflows. If those reverse, so might momentum.
5. Plan your exit or rebalance rule. Decide in advance whether you’ll trim on strength (e.g., back to a fixed target weight) or hold as strategic ballast.

Today’s key tailwinds (and what could derail them)

Tailwinds

• Fed easing cycle: The September cut and the potential for more lowers the opportunity cost of holding gold.
• ETF and central-bank demand: Unusually heavy ETF inflows alongside continued official-sector buying have been powerful.
• Risk and uncertainty: Geopolitics and U.S. fiscal worries have been catalysts for safe-haven flows.

Potential spoilers

• Real yields back up: If inflation cools faster than expected or growth re-accelerates, real rates could rise and pressure gold.
• Stronger U.S. dollar: A sustained dollar rebound often weighs on gold.
• Flow reversal: ETF outflows (profit-taking) can amplify downside just as inflows amplified upside.
• Easing geopolitical stress: A reduction in tail risks can drain safe-haven demand.

Pros & Cons at a glance

Pros

• Diversifier and crisis insurance with low long-term correlation to equities.
• Hedge against policy missteps, currency risk, and some inflation scenarios.
• Benefits when real rates fall—relevant as the Fed shifts to easing.
• Multiple access paths (physical, ETFs, miners, derivatives) to match your needs.
• Structural demand support from central banks and (recently) ETFs.

Cons

• No yield; long stretches of dead money are possible.
• Short-run inflation hedge is inconsistent across countries/periods.
• Physical ownership adds premiums, storage, and resale spreads.
• U.S. tax treatment for many vehicles counts as collectibles (potentially higher rate on gains).
• Elevated prices raise the odds of volatility if the macro winds shift.

A sensible action plan

1. Pick your role for gold (strategic ballast vs. tactical trade).
2. Start small (2–5% of portfolio) and ladder in over several weeks.
3. For ETFs, compare expense ratios, liquidity, and tracking; for physical, compare dealer premiums and storage options.
4. Set rules: rebalance back to target annually or when the weight drifts by 25–50% of your target (prevents concentration creep in a rally).
5. Monitor the drivers: Fed path, real yields, USD trend, central-bank purchases, and ETF flows—these have been central to 2025’s surge.

Bottom line

In today’s environment—fresh price records, a newly easing Fed, and robust demand from both central banks and ETFs—owning some gold makes strategic sense as part of a diversified portfolio.

But “some” is the operative word. Gold is not a magic shield; it’s a tool. Size it so it can do its intended job without dominating your risk. If you treat it as portfolio insurance (with measured exposure, a plan to rebalance, and eyes on the macro signposts), gold can be an asset you’re glad to hold—through calm and storm alike.