Gold futures (GC=F) for August opened at $4,527.60 per troy ounce on Friday, just 0.1% lower than Thursday’s closing price. The price of gold rose in early trading. At 6:27 am ET, the price of gold reached $4,560.40.
Reports that President Trump has received an extension to the 60-day truce with Iran, which he could sign sometime today, has renewed hope in markets that a resolution to the war is not far behind and that the Strait of Hormuz can be reopened once again with unrestricted access.
Investors have little to go on other than the hope that both sides are moving toward a peaceful resolution that would restart the flow of oil and natural gas to countries around the world.
This week, the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditure Index, rose 3.8% in April, a three-year high, driven by the war in Iran. Inflation concerns have all but cemented the Fed’s position to keep rates at current levels after the next Fed meeting in mid-June.
Current price of gold.
The opening price of June gold futures on Friday was almost stable compared to the closing price on Thursday. Below is how the price of gold has changed compared to the past week, month and year:
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A week ago: +0.2%
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A month ago: -1.5%
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One year ago: +37.9%
On January 29, gold’s annual gain was 95.6%.
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How much gold should you own?
An investment in gold can add stability and inflation protection to your portfolio. But it can also dilute your profits when stock prices rise rapidly. Finding the right balance between the diversification benefits of gold and taking advantage of the growth potential of other assets can be difficult.
Even experts are divided on how to strike the right balance. Below, five experts explain their recommended gold allocations, which range from 0% to 20%.
More information: How to invest in gold in 4 steps
No gold: compensation is too high
Robert R. Johnson, a professor at Creighton University’s Heider School of Business, does not advocate investing in gold. In his words, “while having a small position in precious metals may reduce portfolio volatility in the short term, the trade-off between slightly attenuated volatility and loss of long-term performance is certainly not prudent, particularly for Gen Z/millennials with long investment time horizons.”
Allocation from 2% to 5%, depending on the situation
Brett Elliott, director of content and SEO at American Precious Metals Exchange (APMEX), recommends setting an allocation that aligns with your investment goals.
According to Elliott, growth-oriented investors may feel comfortable with a 10% or 15% allocation. But income investors will prefer a smaller position, because gold offers no return. A 2% to 5% gold allocation can provide some resilience without excessively dragging down earnings potential.
More information: Who decides how much gold is worth? How gold prices are determined.
5% to 8% Gold Allocation
Blake McLaughlin, executive vice president at Axcap Ventures, said historical data supports a 5% to 8% gold allocation. “Gold may not offer the enormous return potential of private investments, but the metal has a set of attributes that are increasingly difficult to ignore,” according to McLaughlin. Those attributes include the metal’s resilience amid economic uncertainty and geopolitical unrest.
Gold allocation from 5% to 15%
Thomas Winmill, portfolio manager at Midas Funds, believes most investors will benefit from a long-term gold allocation of 5% to 15%. Winmill specifically advocates investing in gold mining companies through a mutual fund.
According to Winmill, your risk tolerance and current mix of financial assets versus tangible assets can guide you toward an appropriate allocation.
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Risk tolerance: Keep your allocation percentage low if you tend to panic in volatile cycles.
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Financial assets versus hard assets: Financial assets are stocks and bonds. Tangible assets include tangible items such as real estate, gold, collectibles, classic cars, and equipment. If you have no home equity and your wealth is primarily in financial assets, you may want to set a higher gold allocation. Or, if your house is paid for and is more valuable than your stock portfolio, investing in gold may not be necessary.
More information: Are you thinking of buying gold? Here’s what investors need to keep in mind.
20% gold allocation
Vince Stanzione, CEO and founder of First Information, recommends a 20% gold allocation, specifically in physical gold or a gold ETF. Stanzione advocates greater exposure to gold as a wealth protection strategy. As he says, “gold follows inflation and gold retains its purchasing power,” while paper money is being devalued around the world.
More information: Gold IRA: Benefits, Risks, and How It’s Different from a Traditional IRA
Gold price chart
Whether you’re following the price of gold from last month or last year, the gold price chart below shows the change in value of the precious metal so far this year.