The real value of gold: Is it a profitable asset for your portfolio?

During stock market volatility or times of financial crisis, investors often gravitate to gold.

Traditionally seen as a solid, safe option during turbulent times, the reassuring physicality of gold can hold an appeal compared with more intangible stocks and shares.

However, gold can bring its own risks and volatility. If you’re thinking of investing in it, it’s a good idea to understand more about the pros and cons before making your decision.

Investors often turn to gold as a balancing asset during times of market volatility

Gold has a number of diverse uses, including in jewellery and technology. And the value of gold is often at odds with that of other assets, such as shares or property, generally moving in the opposite direction.

This can make it appealing as part of a balanced portfolio, especially in times of financial uncertainty.

And recently, there has been turbulence on a worldwide scale. President Trump’s trade tariffs, along with continuing global conflict in Ukraine and the Middle East, have seen increased market volatility in the early months of 2025.

Demand for gold has increased accordingly. The World Gold Council’s Q1 2025 ‘Gold Demand Trends’ report has revealed that total quarterly gold demand was 1,206 tonnes, a 1% year-on-year increase, in a record high price environment in which gold surpassed US$3,000 an ounce.

However, while gold may be viewed as a more secure investment, it should not be considered as  risk-free. Factors like supply and demand, the global economy, and the political landscape can all affect its value. Increases in gold prices tend to hit the news headlines to a greater extent than when prices dip.

The pros and cons of including gold in your portfolio

The advantages of investing in gold include:

• • Better protection. Market volatility will always occur. As the price of gold often rises when other assets lose money, it could offer some protection against downturns.
  • Increased diversification. A diverse portfolio, in which you spread your investments across a range of assets, can help to keep losses to a minimum. But it’s generally not recommended to make gold a large part of your investments. Forbes suggests limiting your gold profile to between 3% and 6%, depending on your risk tolerance.
  • Boosting demand. Gold can be a way of protecting your wealth. If inflation is high, investors tend to turn to gold as an asset that holds its value, in turn driving demand that can cause gold prices to rise.

The drawbacks of investing in gold include:

• • Lack of regular payouts. Gold won’t give you an income. Unlike other investments, you won’t earn any interest or receive dividends. So gold is a long-term investment, in which your returns are derived from potential price.
  • Additional payments. You could incur some extra costs, such as transportation fees, insurance or storage. It’s not really advisable to keep gold at your property: a safety deposit box or similar is a better way to store gold, and this will add a regular cost.
  • Tax liabilities. Capital Gains Tax (CGT) could be applicable if you sell gold at a higher price than you paid for it. The current CGT Annual Exempt Amount for individuals is £3,000 in 2025/26, meaning this is the amount of gains you can make before you become liable for tax.

Ultimately, it’s a case of weighing up what’s right for you. Your financial planner can help you here.

Gold investments can be in a physical asset or via a fund which tracks values

Physical asset

You can buy physical gold in the shape of bullion bars or coins. Remember, though, you need to factor in things like storage and insurance costs.

Bullion bars are probably most people’s classic image of gold, and they can be of varying weight, from just 1g to over 10kg.

Gold coins are most commonly in the shape of Britannia and Sovereign coins, which are legal tender in the UK and so free from tax considerations for UK residents.

Jewellery generally carries a mark-up fee, so it’s worth checking the actual value of the item, as well as the carat, so you know you’re getting the purity and value you’re expecting.

Worth noting, too, is that gold is an unregulated market, so be vigilant for scams if you purchase through precious metal dealers.

You can buy coins and bullion from the Royal Mint or check the British Numismatic Trade Association for a dealer, as their members must adhere to a code of ethics.

Specialist funds

Another way to invest in gold is by non-physical means, such as a specialist fund or an exchange-traded fund (ETF). This can save you the added complexity of storage and fees.

Specialist funds invest in gold mining companies, rather than gold itself. While their value often reflects that of gold, it can also be influenced by other factors, such as environmental issues and geopolitical risks.

An ETF, however, will track the direct price of gold. The World Gold Council’s report showed that total EFT investment more than doubled in the first quarter of 2025, with investment demand showing a staggering 170% year-on-year increase, likely driven by price momentum and trade tariff uncertainty.

Whether ‘today’ is the right time or the worst time to buy gold is impossible to determine. Therefore, the normal investment principles should apply to consider your risk profile, need for liquidity and access and to ensure an appropriate diversification for your portfolio.

Using the iShares Physical Gold ETF as one example of obtaining exposure, we can see how it behaved against shares over 6 months and 10 years:

Over the short term of 6 months, the gold ETF was negatively correlated with shares providing a hedge particularly during the ‘Trump Tariff’ announcements. Over the longer term of 10 years, gold was more closely correlated with shares.

Get in touch

Gold as part of your portfolio is an interesting proposition, coming as it does with its own unique set of potential benefits and drawbacks.

If you’d like to talk to us about gold, please get in touch. You can email us at info@harperlees.co.uk or call 01277 350560 to find out more, and we’ll be very happy to help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.