How to invest in gold amid the precious metal’s record run

Gold prices notched another fresh record this week as more investors piled into the metal amid economic uncertainty and rising bets for a Federal Reserve rate cut.

So far this year, bullion has gained about 35% as of Friday’s close. Spot gold is now near $3,600 an ounce.

“Without a doubt, gold has been trending higher, and it’s getting a lot of attention from investors,” said Blair duQuesnay, a chartered financial analyst and certified financial planner, who is also an investment advisor at Ritholtz Wealth Management.

Investors regard gold as protective against “bad economic times,” according to research by the Federal Reserve Bank of Chicago. As a safe-haven investment, gold tends to perform well in low-interest-rate environments and during periods of political and financial uncertainty. 

“Gold checks all of those boxes,” said Sameer Samana, head of global equities and real assets at the Wells Fargo Investment Institute.

According to Wells Fargo Investment Institute’s latest investment strategy report, its analysts “expect ongoing gold purchases by global central banks and heightened geopolitical strife to support demand growth for precious metals.”

To invest in the precious metal, investors can either buy physical gold or gold-related financial investments. 

Most experts recommend getting investment exposure to gold through an exchange-traded fund that tracks the price of physical gold, as part of a well-diversified portfolio, rather than buying actual gold coins or bars.

“In times of acute stress, gold stocks underperform, so to the extent that people want exposure, a gold bullion-backed ETF does a better job than gold-related equities and gold miner stocks,” said Samana.

SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) are the two largest gold ETFs, according to ETF.com.

“Gold ETFS are going to be the most liquid, tax efficient and low-cost way to invest in gold,” duQuesnay said.

“It’s much more inefficient to own physical gold,” according to duQuesnay, largely due to higher transaction costs and storage considerations of bullion, including bars and coins.

Alternatively, gold mining stocks are not as closely linked to the underlying price of gold and are more tied to business fundamentals, she added.

Despite gold’s record run, financial advisors generally recommend limiting gold exposure to less than 3% of one’s overall portfolio. 

CNBC Financial Advisor Council member duQuesnay said she has no gold in the portfolios she manages for her clients, in part because of the temperamental nature of any trendy investment.

“Are we in the third inning of this rally of the ninth inning? Gold is priced as a commodity, and that can make it hard to pinpoint the fundamentals,” she said.

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