Gold () futures opened at $3,377.80 per ounce Wednesday, 0.8% above Tuesday's close of $3,350.20. The price of gold futures has been moving closer to $3,400 since Monday following reports of new trade tensions between the U.S. and China.
President Donald Trump's changing stance on tariffs has contributed to gold's gradual rise this year, as many investors favor safer assets amid an uncertain economic outlook. So far, U.S. inflation and jobs data have not changed meaningfully since the new tariffs were announced in early April. The Bureau of Labor Statistics will release the May jobs report on Friday, June 6. Lower-than-expected jobs performance could send the price of gold higher.
The opening price of gold futures on Wednesday is up 0.8% from Tuesday's close of $3,350.20. Wednesday's opening price marks a gain of 2.6% over the past week, compared to the opening price of $3,293.60 on May 28. In the past month, the gold futures price has risen 4.3% compared to the opening price of $3,239.90 on May 2. In the past year, gold is up 44% from the opening price of $2,347.50 on June 4, 2024.
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As we’ve been saying all week, investing in gold is a four-step process, and today, we’ll explore step 3, choosing a form.
Once you define your target gold allocation, you must choose a form of gold to hold. Your three options are:
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Physical gold
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Gold mining stocks
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Gold ETFs
Physical gold pros and cons
Physical gold includes jewelry, gold bars, and gold coins. The advantages of physical gold include:
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Readily accessible for use. If you keep your physical gold at home, it is easily available for you to use as a medium of exchange in an economic emergency.
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No added volatility or ongoing fees. Gold mining stocks tend to rise and fall with gold prices, and business-related factors enhance their volatility. Gold ETFs charge administrative fees in the form of expense ratios.
The disadvantages of physical gold include:
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Risk of theft or loss. Physical gold must be properly secured. Whether you store it in your home or with a depository, gold can be stolen.
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Lower liquidity. Physical gold is less liquid than stocks or ETFs. If you are not using the gold as a medium of exchange, you may need to locate a dealer and pay a markup on the sale.
Gold mining stocks pros and cons
Owning shares in gold mining stocks provides indirect gold exposure. The advantages of mining stocks over physical gold include:
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Greater liquidity. Large-cap gold mining stocks like Barrick Gold Corporation () and Franco-Nevada Corporation () generally enjoy a narrow bid-ask spread, which is a sign of liquidity. The bid-ask spread is the difference between what buyers will pay and what sellers will accept.
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Easy to store. Stocks live in your brokerage account and do not consume physical space. In normal times, this is an advantage. In an economic catastrophe, this could be a disadvantage if brokers or the stock market are temporarily shut down.
The disadvantages of owning gold mining stocks include:
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Greater volatility. Since 2000, gold mining stocks have risen and fallen faster than gold spot prices. And in recent years, gold mining stocks have trended down even as gold has gained value.
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No utility as a medium of exchange. Gold mining stocks can appreciate, but they have no direct utility as a medium of exchange.
Gold ETFs pros and cons
Gold ETFs are funds that invest in gold mining stocks or physical gold. Their advantages include:
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Easy to store. Like gold mining stocks, ETF shares are essentially digital assets with no storage requirements.
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Greater liquidity. Shares of the most popular gold ETFs, like SPDR Gold Shares ($), are heavily traded which implies good liquidity.
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Tied directly to gold prices. ETFs backed by physical gold can be less volatile than gold mining stocks or gold mining ETFs.
The disadvantages of gold ETFs include:
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Fund fees. Funds charge fees, which dilute returns over time. For context, the expense ratio of SPDR Gold Shares is 0.40%. This translates to $4 in fees annually for every $1,000 invested.
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No utility as a medium of exchange. As with gold mining stocks, you probably cannot use ETF shares to trade for food in an economic emergency.
Whether you’re tracking the price of gold since last month or last year, the price-of-gold chart below shows the precious metal’s steady upward climb in value.
Historically, gold has shown extended up cycles and down cycles. The precious metal was in a growth phase from 2009 to 2011. It then trended down, failing to set a new high for nine years.
In those lackluster years for gold, your position will negatively impact your overall investment returns. If that feels problematic, a lower allocation percentage is more appropriate. On the other hand, you may be willing to accept gold's underperforming years so you can benefit more in the good years. In this case, you can target a higher percentage.
The precious metal has been in the news lately, and many analysts are bullish on gold. In May, Goldman Sachs Research predicted gold would reach $3,700 a troy ounce by year-end 2025. That would equate to a 40% increase for the year, based on gold’s January 2 opening price of $2,633. Rising demand from central banks, along with uncertainty related to changing U.S. tariff policy, are the factors driving the increase.
If you are interested in learning more about gold’s historical value, since 2000.
Tim Manni edited this article.
