Gold has come back into sharp focus in recent months – not least due to the price rise above $5,500. Many beginners are now asking themselves: How much gold allocation actually makes sense in the portfolio? Is there a „right“ amount? Here is an overview of common rules of thumb and considerations that are frequently used in practice.
Historical Rules of Thumb and Their Origins
There is no universal „right“ gold allocation, but certain reference values have become established over decades. They come from different schools of thought (risk management, inflation protection, crisis hedging):
- 5–10 %: The most common recommendation in classic asset management and by many financial advisors. Gold serves here as a small diversification component and inflation protection, without overburdening the portfolio.
- 10–15 %: Often used in times of heightened uncertainty (e.g. after financial crises, geopolitical tensions). Many institutional investors (pension funds, foundations) move in this range when they see gold as genuine protection.
- 15–25 % or more: Occurs especially in very conservative or crisis-oriented strategies (e.g. Harry Browne's „Permanent Portfolio“: 25 % gold). Here, gold stands as real „insurance protection“ in the foreground.
- 0–5 % or no gold at all: Many growth-oriented or young investors do without completely or hold only a very small proportion, because gold brings no ongoing income (dividends, interest).
Which factors play a role in the decision?
The „right“ allocation depends heavily on the personal situation:
- Risk tolerance: Those who cannot tolerate strong price fluctuations tend towards lower allocations. Those who prioritize crisis protection go higher.
- Age & investment horizon: Younger investors (long horizon) often need less gold, because stocks bring higher returns in the long term. Older investors or those nearing retirement increase gold often as a stabilizer.
- Inflation & crisis perception: In times of high inflation or geopolitical tensions (as currently), the gold allocation increases for many investors.
- Tax & practical aspects: In Germany, gold (physical) is tax-free after 1 year holding period, ETFs/ETCs are subject to capital gains tax. Physical gold is illiquid and more expensive to store.
Examples from practice
- Young investor (25–40 years, growth-oriented): Often 0–5 % gold (mostly ETF), because the focus is on stocks/ETFs.
- Middle age (40–55 years, balanced): Frequently 5–15 % (mix of ETF and some physical).
- Near retirement or very conservative: 15–25 % or more, often with physical gold as core.
Risks and limits of the rules of thumb
Gold does not protect against all risks: In strong stock bull markets (like 2010–2020), gold often moved sideways or fell. In deflationary phases (like 2008–2009), it was also no guarantee. The allocation should therefore never be static – many investors adjust it annually (rebalancing).
Conclusion
There is no „one right“ gold allocation – 5–15 % are the most common sensible range in practice for most beginners and long-term investors. Those who go higher usually do so for crisis or inflation protection reasons. Those who stay lower focus more on growth. In the end, it counts that the allocation fits one's own risk tolerance, age and overall strategy. Anyone who wants to hold or acquire gold ETFs or physical gold will find a neutral overview here of established platforms that cover almost the entire range of assets: To the Trading Platform Overview.