Should you be investing in gold?

The price of gold has hit a series of all-time highs, catching the eye of savers and seasoned investors alike. The ‘yellow metal’ is glittering more brightly than it has for years, leading many to wonder whether it's time to get on board.

This surge is being fuelled by global instability (gold always does well in conditions like this) and huge purchases from the world's central banks, leading many to see gold as an essential defensive asset. But does a rising price mean you should jump in, or is there a risk of buying at the top? We’ll explore whether gold is a golden opportunity, or a gamble best avoided.

What’s on this page?

• Why invest in gold?
• How has the gold price performed?
• What are the drawbacks of investing in gold?
• Is gold exempt from inheritance tax?
• How to invest in gold

Why invest in gold?

Gold’s appeal centres on its role as a portfolio diversifier and store of value during uncertain times.

Chris Beauchamp, chief market analyst at IG, explains: “Unlike shares or bonds, gold often moves independently from traditional assets, providing crucial protection when correlations spike during market stress.”

When stock markets fall, the price of gold often moves in the opposite direction. So, having some of your portfolio invested in gold can add diversification, help reduce risk and make your investments more resilient. 

Beauchamp adds: “For investors sitting on cash earning minimal returns, gold offers a middle ground between volatile stocks and low-yielding savings accounts.”

Laith Khalaf, head of investment analysis at AJ Bell, points out that investing in gold can inflation-proof your finances too. “Gold is durable, has a history of being money since time immemorial, and is difficult and expensive to produce. So it can be seen as a store of value at a time when inflation is eroding the purchasing power of money.”

According to Bullionvault, the top reasons for investing in precious metals are inflation protection and diversification.In its December 2024 survey, 30% of investors cited diversification and 34% cited inflation.

Bear in mind though that although it has risen in price in recent years, there is no guarantee that gold will keep pace with inflation, and it can fall in value.

The yellow metal has caught the eye of over-50s in particular. The precious metals marketplace BullionVault told Saga Money that the number of over-50s investing in gold for the first time using its platform has soared 88% since the pandemic compared to the previous five years.

That’s more than twice the growth rate among the under-50s cohort, which has only increased 43%. Adrian Ash, director of research at the firm, says the rise is due to older savers having more money that needs protecting, and gold’s ability to “help defend what you’ve got − something which the pandemic, inflation, [wars and conflict] all make more urgent”.

How has the gold price performed?

Since 1970, the annual return from gold has varied wildly from a 113% return (in 1979) to a 29% loss (2013), according to Bullionvault. Ash summarises: “For UK investors, it lost 0.7% every year on average during the ‘long boom’ of the 1980s and ’90s. But since the turn of the millennium, gold in sterling terms has risen by 11.7% a year on average, far outrunning the stock market, house prices and bonds.”

Gold rose 11.7% in 2022, 7.8% in 2023, and 28.3% in 2024. This compares to a 0.3% annual return for UK shares in 2022, 7.9% in 2023 and 9.5% in 2024. This year continues the pattern, with the gold price rising by around 20% so far this year (at the time of publication) already for UK investors.

This means it has outperformed other asset classes, although it is currently down from the all-time high of £2610 per oz set on April 22 this year. The price has been helped by conflict between Russia and Ukraine, and Israel and Iran, plus the volatility of President Trump’s second term.

Gold is often seen as a safe haven and a way to protect your wealth during times of trouble. However, Khalaf warns that gold is volatile and can drop sharply.

“Investors in their 50s and above might be attracted to gold because of its ‘safe haven’ status. This comes from the fact that people tend to flock to the precious metal in times of financial stress, but this doesn’t mean gold isn’t volatile. It is, and steep losses can be incurred.

“Between 1980 and 1982, the gold price fell by over 60%, and between 2011 and 2015, it fell by around 45%. From its peak in 1980, the gold price fell by 33% over the next 20 years, and it took a further seven years to recover. That’s a long period in the wilderness.”

What are the drawbacks of investing in gold?

Gold doesn’t produce any income. This is in contrast to shareholders who may receive a dividend, and savers who get interest on their cash.

John Moore, wealth manager at RBC Brewin Dolphin, says: “There is no interest, no dividend yield and no fundamental value to benchmark gold against, so there can be periods of uncertainty. Before you invest, you should consider whether you are comfortable with this.”

Khalaf echoes this, adding: “Gold itself offers no yield, has limited industrial use and comes with a cost of ownership, in the form of storage and insurance, so many investors won’t embrace the metal, especially when they can get returns from cash in the bank that might currently exceed inflation.”

If you’re looking for a risk-free investment, gold isn’t the answer, as we’ve already highlighted with the performance figures. Nor is it necessarily the answer if you're looking for growth. Beauchamp says: “Growth-focused investors may find gold too conservative, particularly during bull markets when shares deliver superior returns.”

Instead, the yellow metal works best as a small allocation in a wider portfolio.

Khalaf adds: “Gold shouldn’t be seen as a cash proxy, nor should it be held in isolation. But it can be held alongside cash, bonds and shares as part of a diversified portfolio of assets that perform well at different times.”

Is gold exempt from inheritance tax?

Gold is usually part of your estate for inheritance tax purposes. The possible exemption is that gold held within a self-invested personal pension (more on this below) would currently be exempt from inheritance tax, but there are plans to change this from April 2027. 

If you do want to pass gold on to your family, there are options to do this in your lifetime, in much the same way as you can choose to pass on cash.  

Giving gold coins, such as gold sovereigns, as Christmas or birthday presents can help distribute wealth within the £3,000-a-year gifting allowance. Or you could do it using the regular gifts out of income allowance. 

Gold can also be given as a marriage gift to children, grandchildren or others without triggering an inheritance tax liability.   

How to invest in gold

There are several ways that people invest in gold, including buying gold bars and investing in a fund that tracks the gold price.

Moore says: “The issues with physical gold are practical ones – what if it’s lost or stolen, where do you store it and what are the associated costs? A fund can be easier as this is administered for you, typically with an exchange traded product provider.”

Here are the pros and cons of four different approaches:

Gold coins and bars 

Pros

• Can feel reassuring to own gold coins or bars and hold them in your hand.
• Gold coins made by the Royal Mint, such as sovereigns and Britannia coins, are exempt from capital gains tax (CGT). This is because they’re classed as legal tender.

Cons

• It can be time-consuming and expensive to buy, store and insure them. 
• You can’t hold gold bars and coins in an ISA (but you may be able to hold them in a self-invested pension (SIPP)).

Vaulted bullion 

Pros

• These are gold bars held in secure vaults, so you don’t need to worry about storing them at home, or insurance.
• You can buy part of a gold bar, from as little as 1 gram at a time.

Cons

• You’ll need to pay a fee to keep the gold in the vault. This is typically charged as a small percentage of the gold’s value per year, plus charges for buying and selling. 
• You can’t hold gold bullion in an ISA, but you may be able to hold it in a self-invested personal pension (SIPP).

Exchange traded commodities (ETCs) 

Pros

• A gold exchange traded commodity (ETC) is a type of exchange traded product, which is backed by physical gold. This means it tracks the gold price, so if the price goes up, your investment goes up. Likewise, if it goes down, your investment goes down. You do not own the physical gold, so there are no storage or insurance costs to worry about. 
• It’s easy to buy and sell ETCs. Examples include Invesco Physical Gold and iShares Physical Gold.
• Most can be held in ISAs and SIPPs, so you won’t need to worry about paying tax on your gains.

Cons

• You’ll need to pay an investment fee, although they are usually cheap, at about 0.2% a year.
• You don’t own any physical gold.

Gold mining shares or gold fund 

Pros

• You can also invest in gold via gold mining shares, or a fund that holds a collection of gold mining shares. This can be useful if you want to invest in gold as an industry, and are happy to invest in the stock market.
• Can typically be held in ISAs and SIPPs, meaning any gains can be free of tax.

Cons

• They are not as closely aligned with the gold price, compared to buying physical gold or an ETC. Gold mining shares will be affected by the performance of the mining business and broader stock market. movements 
• Gold miners are less of a portfolio diversifier, because they trade in a similar way to other shares.