How Much Gold Should You Own?

It is one of the most common questions in personal finance: how much gold should I have? Ask ten advisors and you will likely hear ten different answers, ranging from “none” to “20% or more.” The truth is that the right gold allocation is deeply personal — it depends on your age, risk tolerance, existing portfolio composition, income needs, and beliefs about monetary policy and systemic risk.

What we can offer is a tour of the most common allocation frameworks, the reasoning behind each, and some practical questions to help you decide where you fall on the spectrum.

Why Gold in a Portfolio at All?

Before sizing an allocation, it helps to be clear about why you are including gold. The most common reasons investors hold gold:

• Inflation hedge: Gold tends to preserve purchasing power over long periods, even when paper currencies lose value
• Portfolio diversification: Gold has historically had low or negative correlation with stocks, helping smooth out portfolio volatility
• Tail-risk insurance: In severe financial crises, geopolitical disruptions, or currency crises, gold often holds value when other assets do not
• Store of value: Physical gold cannot be printed, inflated away, or defaulted on

If none of these concerns apply to you — if you are young, fully employed, have no near-term liquidity needs, and are comfortable riding out severe market drawdowns — a minimal gold allocation may be rational. But for most investors, at least some exposure to gold makes strategic sense.

Common Allocation Frameworks

The Conservative View: 5% or Less

Many mainstream financial planners recommend no more than 5% in gold. Their reasoning: gold produces no income (no dividends, no interest), so a large allocation drags on long-term returns in environments where stocks and bonds perform well. A 5% allocation provides some insurance without meaningfully diluting portfolio growth.

This view dominated from the 1980s through the 2000s, during a period when interest rates were falling, stocks were booming, and inflation was contained. In that environment, gold underperformed equities substantially. Critics of higher gold allocations often point to this era.

The Moderate View: 5–15%

A growing number of institutional investors and independent advisors advocate for a 5–15% gold allocation as a permanent portfolio component. Ray Dalio’s widely discussed “All Weather Portfolio” allocates 7.5% to gold. The permanent portfolio concept developed by Harry Browne allocates 25% to gold — one of four equal allocations alongside stocks, bonds, and cash.

Research by the World Gold Council has repeatedly shown that allocations in the 5–10% range have historically improved risk-adjusted returns (as measured by Sharpe ratios) without significantly reducing long-term gains. Gold’s low correlation to equities provides genuine diversification benefit — not just a feeling of safety, but measurable volatility reduction.

The Elevated View: 15–25%

Investors with strong convictions about monetary risk, dollar debasement, or systemic financial instability often hold 15–25% or more in precious metals. This is not irrational — it reflects a specific worldview about the fragility of the current monetary system and the likelihood of future crises that will reward hard asset holders.

For investors approaching or in retirement, a higher gold allocation can also serve as a deflation hedge for income-producing assets. Gold does not fluctuate with the credit cycle the way bonds do, making it a useful complement to a fixed-income portfolio.

Factors That Should Influence Your Allocation

Time Horizon

Gold tends to shine brightest during periods of economic stress and currency instability. If your investment horizon is 30+ years, you have time to ride out both gold’s strong periods and its prolonged flat spells. If you are 10 years from retirement, a meaningful gold allocation provides more immediate protection against sequence-of-returns risk.

Existing Portfolio Composition

If you already hold significant real estate, commodities, or inflation-protected securities (TIPS), your effective exposure to hard assets may already be higher than you think. Gold becomes more valuable as a diversifier in a portfolio that is otherwise heavily weighted toward paper assets — equities, bonds, and cash.

Income Needs

Gold pays nothing. If you depend on your portfolio for living expenses, a large gold allocation creates a drag unless you are willing to sell gold periodically to fund withdrawals. Income-focused investors may prefer a smaller gold allocation supplemented by income-generating assets.

Your View on Monetary Policy

Investors who believe central banks will continue to expand money supplies aggressively, that inflation will run above historical averages, or that the dollar’s reserve currency status is genuinely at risk tend to hold more gold. Investors who trust institutional monetary management and believe in the long-term primacy of equities tend to hold less. Neither view is obviously wrong — they reflect different assessments of macro risk.

Physical Gold vs. Paper Gold in Your Allocation

Your total “gold allocation” can include physical bullion, gold ETFs, gold mining stocks, or gold futures — but these behave differently in a crisis. Physical gold has no counterparty risk; it exists regardless of what happens to financial systems. ETFs and mining stocks, while convenient, are financial instruments that require functioning markets, custodians, and brokerages to access.

Many advisors suggest that if your gold allocation is meaningful (above 5%), at least a portion — half or more — should be in physical form. For a 10% allocation in a $500,000 portfolio, that means $25,000–$50,000 in actual bullion. This is a practical, achievable target for most investors and provides the kind of genuine crisis insurance that physical gold uniquely delivers.

Gold IRAs: Tax-Advantaged Exposure

For retirement savers, a self-directed gold IRA allows physical gold to be held within an IRA structure, providing tax deferral (traditional IRA) or tax-free growth (Roth IRA) on gold’s appreciation. This makes a gold allocation more efficient for long-term retirement portfolios, where compounding tax advantages matter significantly over decades.

If you are considering a gold allocation within retirement accounts, a precious metals IRA is worth exploring with a qualified custodian.

A Practical Starting Point

If you are new to gold investing and unsure where to begin, a 5–10% allocation is a sensible, evidence-backed starting point. It provides meaningful diversification and inflation protection without dramatically altering your overall return profile. From there, you can scale up or down as your understanding deepens and your macro views develop.

The worst mistake is not the wrong allocation — it is owning no gold at all until a crisis makes it obvious why you should have, at which point prices have already moved sharply higher.