Funds instead of bullion: 7 Wall Street experts on how best to invest in gold

The expected reduction of the Fed rate caused an increase in demand for gold. Futures for the precious metal are trading near historic highs, exceeding $3600 per troy ounce. Many experts see this asset as a "safe haven" against the background of economic instability and geopolitical tension. Others caution: gold doesn't generate income like stocks and bonds and is often taxed at a higher rate. MarketWatch has gathered advice from seven Wall Street experts on how to be an investor who still wants to invest in a traditional protective asset.

Gold is the basic element of a portfolio in the conditions of growing volatility, says Justin Cardwell, research director at Alternative Options. In his opinion, the key factor in favor of the precious metal remains the pressure on the U.S. dollar. With the growing national debt and the sharp rise in the price of products and raw materials, inflation risks have become quite real, the expert believes. That is why consultants are increasingly moving to the 60/30/10 portfolio model, where about 10% is allocated to protective assets like gold, Cardwell emphasized.

"For those looking several years ahead, gold can still play a meaningful role in a portfolio. Looking forward, we believe portfolios with diversification and a moderate commodity presence will be sustainable in 2025. While duties and weak economic data have heightened inflation concerns, business-friendly policies and the Fed's soft stance could support both equities and commodities. Gold fits seamlessly into this combination as an underlying asset during periods of increased volatility," Cardwell summarized.

"For clients investing in gold, we recommend that they consider it only as part of a well-diversified strategy - and, as always, avoid putting all their eggs in one basket," said Alex Mihalka, vice president of investments at Wealthfront.

Wealthfront explained that it typically does not include gold in standard recommended portfolios for several reasons. Unlike stocks and bonds, it doesn't earn interest income and is just a bet on price appreciation. Plus, gold is taxed at a higher rate and can be more volatile than high-quality bonds, for example. That said, many investors use it as a hedge against inflation and uncertainty, so the company does offer access to gold ETFs through customized portfolio settings.

Investing in gold should be viewed as "portfolio insurance" rather than a source of income, says Genesis Gold Group CEO Jonathan Rose. Therefore, he advises investors who need a steady cash flow to combine gold with other income-generating assets.

"Physical gold stored in a safe deposit box is a form of financial insurance that is becoming increasingly valuable and sought after in today's unpredictable environment," says Rose. He says the current rise in gold prices reflects fundamental economic realities rather than speculation: "Ongoing inflation risks, serious geopolitical tensions and unprecedented levels of government debt make gold's strong performance logical and sustainable."

"If you have a healthy and fully diversified portfolio, allocating a maximum of 3-5% to gold looks like a sensible solution for those who are really concerned about inflation, currency depreciation and/or geopolitical risks. That's your ticket. But if you go in at 20% or more and then claim gold is better than stocks, it's a joke. Gold is an emotional 'pressure release valve', not a wealth accumulation tool," says Eric Croak, an accredited wealth management advisor at Croak Capital.

Croak emphasizes that gold does not generate income because it has no coupons or dividends, unlike stocks or bonds. Its rise during periods of market panic is more often due to sentiment than to the creation of real value. "Bonds fulfill their function, stocks fulfill their function, and gold just lies there," the analyst notes. In his opinion, such a static asset is not suitable for a long-term portfolio designed for capital growth through reinvestment. At the same time, he emphasizes that he does not consider gold useless.

"Investments can range from digital gold to physical bars and coins, ETFs or complex derivatives. Pick one direction and figure it out," says Brett Elliott, director of marketing at American Precious Metals Exchange. He says bullion is convenient for long-term storage, but it's harder to sell. ETFs or digital gold are better for short-term trading - they have a smaller difference between the buy and sell price, and transactions can be conducted online. Elliott warns that gold, like any investment, has risks. You can lose money if you buy at a peak and sell at a fall. At the same time, the yield of gold since the beginning of the year amounted to 38%, which makes it one of the best assets in the world. According to the expert, gold is a very safe investment. "Unlike stocks and bonds, which can depreciate to zero when a company goes bankrupt or defaults, gold will not lose its value," emphasized Brett Elliott.

"We believe most investors should not hold gold in bullion form," says Thomas Winmill, portfolio manager at Midas Funds. - Physical gold has a negative return on capital because of storage, insurance and other costs. Investing in certain gold mining companies, on the other hand, not only provides inflation protection through ownership of gold reserves, but also offers good prospects for current returns. A mutual fund can be a good way to invest in gold mining companies." Investments in gold and commodities in general are speculative in nature, as their prices depend on many unpredictable factors - from macroeconomics and politics to industry and finance, the expert adds.

"For many investors, investing through ETFs is more efficient, cheaper and provides more liquidity," adds Robert Minter, director of ETF investment strategy at Aberdeen Investments. He believes investing in gold through ETFs is as easy as investing in equities, but buying physical gold comes with a number of challenges. While gold ETFs usually store the metal in a custodial bank in secure vaults that are regularly audited, buying bullion through physical dealers can be much more expensive and can significantly reduce returns.

This article was AI-translated and verified by a human editor