Why gold endures as a store of value

Gold’s appeal is simple: it’s scarce, globally recognised, and has historically maintained purchasing power over long periods. Unlike many financial assets, gold is not dependent on a single issuer’s creditworthiness—there’s no company balance sheet or government promise behind a bar of bullion.

That doesn’t mean gold is “risk-free” (its price can fluctuate), but it has often been viewed as a strategic asset during periods of monetary instability. For an overview of how gold is commonly positioned in portfolios, you can explore research and commentary from the World Gold Council.

Investors typically consider physical gold bullion when they want a tangible, widely traded asset that may help balance exposure to stocks, bonds, property, and alternative investments.

How gold supports portfolio diversification

Diversification works when you combine assets that don’t always move in the same direction. Equities can deliver strong long-term growth but may experience sharp drawdowns. Bonds can stabilise portfolios, but their effectiveness can vary—especially in certain inflationary environments.

Gold is often used as a portfolio diversifier because it may perform differently across economic regimes. In practice, the goal is not to “bet on gold”, but to reduce reliance on any single driver of returns.

A common approach is to use a modest allocation sized to your objectives—such as volatility reduction, inflation sensitivity, or defensive positioning—while keeping the core of the portfolio aligned to your growth plan.

If you’re building a wider strategy, you may find it helpful to review other insights in our News & Insights section. (If you have a dedicated “Investments” or “Alternatives” hub page, link it here too—for example: Investment themes.)

How to invest in physical gold bullion

Physical gold bullion typically comes in two formats: bars and coins. Both can be effective, but they differ in pricing, liquidity, and premiums above the spot price.

Gold bars

• Lower premiums (often): Larger bars can carry lower premiums relative to weight.
• Storage-first mindset: Bars are commonly stored in professional vaults rather than handled frequently.
• Liquidity considerations: Very large bars may be less convenient to sell in smaller portions.

Gold coins

• High recognisability: Coins are widely known and can be easier to trade in smaller denominations.
• Higher premiums (often): Minting and distribution can increase premiums compared with bars.
• Practical flexibility: Coins can be useful if you value divisibility and broad market familiarity.

Whatever you choose, aim for widely recognised products and reputable sourcing. Industry standards and responsible sourcing frameworks are often referenced by bodies such as the LBMA.

Storage and security: what matters most

For many investors, storage is the deciding factor. The best option depends on your priority: convenience, security, auditability, and access. Consider these common routes:

Home storage

• Pros: Immediate access and simplicity.
• Cons: Security risk, insurance limitations, and potential personal safety concerns.

Bank or private safe deposit

• Pros: Additional security compared with home storage.
• Cons: Access constraints, potential restrictions, and varying insurance arrangements.

Professional vault storage

• Pros: High security, insured custody, formal documentation, and (often) easier resale.
• Cons: Ongoing fees, and you may not have immediate physical access.

If your goal is a long-term strategic allocation, professional storage can be attractive because it supports clean documentation, insurance, and transferability—particularly if you intend to rebalance or sell efficiently.

Costs and risks to understand

Physical gold can be a powerful diversifier, but it’s not a magic solution. Before investing, be clear on the trade-offs:

• No income stream: Gold does not pay dividends or interest, so returns rely on price movement.
• Premiums and spreads: Buying and selling can involve dealer premiums and bid/ask spreads.
• Storage and insurance costs: Particularly relevant for vault custody or insured arrangements.
• Price volatility: Gold can move sharply, especially around macro events and shifts in real yields.
• Concentration risk: Oversizing gold can reduce long-run growth potential if it crowds out productive assets.

The practical takeaway: treat gold as a portfolio tool, not a single-point solution. Size it deliberately, measure results, and rebalance when your portfolio drifts away from your plan.

Gold vs ETFs vs mining shares

“Gold exposure” can mean different things. Here’s a plain-English comparison:

Physical gold bullion

• Best for: Tangible ownership, long-term strategic holding, and investors who value custody control.
• Watch-outs: Storage, insurance, and dealing spreads.

Gold ETFs (financial exposure)

• Best for: Convenience, fast liquidity, and easier rebalancing within brokerage accounts.
• Watch-outs: Ongoing fees, structure details, and exposure is not the same as holding physical bullion yourself.

Gold mining shares

• Best for: Higher beta exposure (potentially larger upside in bull markets for gold).
• Watch-outs: Company risks (management, costs, geopolitics), equity market correlation, and operational risks.

Many investors combine approaches—using physical gold for strategic resilience and ETFs for tactical flexibility—depending on objectives. If you want help choosing an approach, speak to our team and we’ll outline options and trade-offs.

FAQs

How much gold should I hold in my portfolio?

There’s no universal number. Many investors discuss modest allocations (often 5–15%) depending on goals, portfolio construction, time horizon, and risk tolerance. The right level is the one that improves resilience without undermining long-term growth.

Is physical gold better than a gold ETF?

Physical bullion offers tangible ownership and custody control, while ETFs can offer convenience and liquidity. The “better” option depends on whether your priority is direct possession, ease of trading, costs, and how you intend to rebalance.

Are coins or bars better?

Bars can offer lower premiums at scale, while coins can be more flexible and familiar for smaller transactions. Choose based on budget, liquidity preference, and storage plan.

What are the main risks of holding gold bullion?

Key risks include price volatility, dealing spreads, storage and insurance costs, and the fact that gold does not produce income. Oversizing an allocation can also reduce long-run growth if it replaces productive assets.

How should gold bullion be stored?

Storage options include secure home storage, deposit boxes, and professional vaulting. Professional vaulting is often preferred for larger allocations due to insurance, security, documentation, and resale efficiency.