Why Not 0%?
Gold provides benefits paper assets can't:
- No counterparty risk: Physical gold doesn't depend on any company or government
- Inflation hedge: Gold has preserved purchasing power for thousands of years
- Crisis insurance: Gold often rises when stocks fall
- Portfolio diversification: Low correlation to stocks and bonds
Why Not 50%?
Gold also has limitations:
- No income: Gold doesn't pay dividends or interest
- Volatility: Gold can drop 30-40% in bear markets
- Storage costs: Physical gold requires secure storage
- Opportunity cost: Stocks have higher long-term returns (historically)
Factors That Should Increase Your Allocation
Consider more gold (10-20%) if:
- You're concerned about inflation or currency debasement
- You're heavy in stocks and need diversification
- You're nearing retirement and want wealth preservation
- You distrust the financial system or government
- You have a long time horizon (10+ years)
Factors That Should Decrease Your Allocation
Consider less gold (5% or below) if:
- You need income from your investments
- You're young and prioritizing growth
- You already have significant real asset exposure (real estate)
- Storage costs would eat into small investments
Don't Forget Silver
When we say "gold allocation," most investors include silver:
- Typical precious metals mix: 75-80% gold, 20-25% silver
- Silver adds industrial exposure and higher volatility (potential upside)
- See our Gold vs Silver comparison
Common Mistakes to Avoid
- Going all-in during crisis: Buying 50% gold when scared leads to buying high
- Ignoring fees: IRA fees matter more on small allocations
- Emotional decisions: Have a plan and stick to it
- Forgetting to rebalance: If gold surges, rebalance back to target