Gold just hit $2,100 per ounce, and suddenly everyone's asking if they should buy. The commercials make it sound like the only safe place for your money. But before you convert your savings into gold bars, let's look at what gold actually does - and what it doesn't.
Gold doesn't generate income. It doesn't pay dividends or interest. It just sits there, hoping someone pays more for it later. Over the past 50 years, gold has returned about 4% annually on average. That sounds fine until you compare it to the S&P 500's 10% average return. A $10,000 investment in gold in 1973 would be worth about $100,000 today. That same $10,000 in the S&P 500? Over $1.3 million.
But gold does have a legitimate role: insurance against extreme market chaos. When stocks crash hard, gold often holds value or goes up. It's not for growing wealth - it's for preserving wealth during crises. That's why financial advisors typically recommend 5-10% of your portfolio in gold, not 50%.
The timing question is tricky. Gold tends to perform best when inflation is high, interest rates are falling, or geopolitical tensions spike. Right now we have inflation cooling, rates that might drop, and ongoing global conflicts. That's a mixed picture, not a screaming buy signal.
Bottom line: Gold belongs in your portfolio, but as a small hedge, not your main investment. If you don't have any gold exposure and market volatility makes you nervous, 5-10% makes sense. But don't dump your retirement savings into it because some TV personality said to. That's how people get burned when gold inevitably drops again.