Riding the modern-day gold rush

We’re in the midst of a modern-day gold rush fuelled by the global panic from Donald Trump’s tariff war and his wider financial and economic strategies.

When investors and financial markets are spooked they retreat to the safety of cash and gold. This week the gold price set all-time highs of over US $3,000 an ounce which converts to over AU $5,000 an ounce in Aussie dollars. Over the last three months gold has risen 20 per cent in value – its best quarter since 1986. Just 18 months ago the commodity was trading below US $2,000 an ounce. It has been crazy.

That’s why shares in Australian gold miners are going through the roof … their costs of production are in Australian dollars but they sell their gold in US dollars.

A lot of investment gurus say every investment portfolio should include some gold. Here’s why, and why there is a ‘gold rush‘ on at the moment.

A bull market

Investor confidence in gold is currently high with inflationary concerns, political instability, and rising debt levels making it a ‘safe’ investment. In times of uncertainty gold is seen as one of those safe investment havens to shelter your wealth.

Gold withstands wobbly economic times as it isn’t tied to any one currency. So, when major currencies like the US dollar lose value (due to inflation or political instability), gold maintains its value better than most assets.

Historically we’ve seen this to be the case: For example, in the 1970s, when inflation was through the roof and oil prices skyrocketed, gold surged from about US $35 an ounce in 1971 to nearly US $800 an ounce by 1980. Likewise, during the 2008 Global Financial Crisis (GFC) investors flocked to gold, seeking stability.

Today, with Trump’s tariffs, ongoing geopolitical tensions (such as Russia and Ukraine and Israeli airstrikes in Gaza), cost of living, growing global debt levels increasing inflation and risking currency devaluation, gold is proving to be a golden investment.

How gold helps protects your money

Every investment expert will tell you that diversification is key to managing risk. By spreading your investments across different assets, you reduce exposure to any single market or event. Including gold in an investment portfolio is one such way.

Many financial advisers recommend a sample diversification portfolio that looks like this:

Stocks (40 per cent) – A mix of local and international markets, and industries.
Bonds (25 per cent) – Government and company bonds.
Real estate (10 per cent) – Property investments.
Gold (5 per cent) – Protects against market downturns.
Cash (5 per cent) – Provides stability.
Alternative investments (5 per cent) – Riskier options like cryptocurrencies.

Diversifying reduces the risk of losing everything if one asset drops. While stocks offer growth and risk, bonds and cash provide stability, and gold acts as a hedge against market volatility and inflation.

Why is gold so valuable?

Gold’s value comes from its limited supply and high demand. Even though gold is plentiful, it’s difficult and costly to mine, making it more valuable. Though modern mining has made it easier, building mines is still expensive and dangerous.

Australia is the third biggest gold producer in the world and the biggest exporter.

Today, 50 per cent of gold demand is for jewellery, and 40 per cent is for investment (coins, bullion, bars, and ETFs). Central banks, individuals, and ETFs are the main investors. The remaining 10 per cent is used in industries like dentistry and tech due to gold’s excellent conductivity.

Gold has also been used in trade and to build wealth. Back in the day, paper money was actually backed by gold, with every printed note corresponding to an amount of gold held in a vault.

The thinking was, if paper money suddenly became worthless, we would still have something of worth to facilitate trade. This is one of the reasons investors tend to push up the price of gold when financial markets are volatile.

How to invest in gold

Talk to your adviser, but most experts say that if you’re adding gold to your portfolio, keep it under 10 per cent to avoid putting all your eggs in one basket. Here’s how to invest in gold:

Bullion, bars, and coins: You can buy physical gold, but remember to factor in storage and insurance costs. Purchase from dealers, banks, or mints.
Gold coins: Smaller amounts that can be more easily bought and sold, but usually it comes with a premium over the gold price.
Gold ETFs: there are a range of exchange-traded funds available which hold a portfolio of gold mining shares through to actual physical gold. Buy through an online broker, but don’t forget that there are management fees.
Gold mining stocks: Invest in gold mining companies. There is potential for higher returns if gold prices continue to rise, but do your research because there are good and bad mining companies.
Gold mutual funds: Diversify with funds that invest in gold-related assets like physical gold or gold mining stocks. Management fees apply.
Gold futures: These are contracts to buy or sell gold at a future price, offering potential high returns but with added risk. Requires a brokerage account.
Gold certificates: This is ‘representative ownership’ of gold stored in a vault, but you don’t have physical access to the gold. Available through banks or dealers.
Gold-backed cryptocurrencies: Cryptos like Paxos Gold (PAXG) combine gold with crypto flexibility, but are subject to crypto market volatility. Available on platforms like Binance.