Amid the wild swings of mega-cap tech stocks and cryptocurrencies over the past year, one traditional asset quietly reached fresh highs: gold. On October 7, gold climbed past USD $4,000 per ounce for the first time. Over the prior 12 months it gained roughly 45.7% in U.S. dollar terms—and even more when measured in Canadian dollars.
That surge, along with renewed fears of a stock-market downturn, has led many Canadians who never previously considered gold to ask whether the metal should belong in their portfolios. Even Canada’s largest robo-advisor allocates a small portion—about 2.5%—of most client accounts to gold, and a higher share in some specialized strategies.
The key question for individual investors is simple: should you buy now, or would you be catching the market at its peak? No one can answer that with confidence except in hindsight. You will also encounter vocal advocates—“gold bugs”—recommending you sell everything and load up on bullion. Their extreme advice is usually best ignored.
Below is a clear, practical summary of the most important facts about investing in gold to help you decide whether it deserves a place in your holdings.
Why is gold valued?
Gold has many industrial and decorative uses—jewellery, dentistry and electronics among them—but the vast majority of mined gold is stored in vaults as bars or coins. Like money or cryptocurrencies, gold is valuable because people agree it has value. Unlike paper money or some digital assets, it is not subject to direct manipulation by monetary policy.
As of early 2025, analysts estimate all refined gold above ground totals about 216,265 tonnes, with a market value near USD $21.5 trillion. Global mines added roughly 3,661 tonnes in 2024, so supply is growing but only slowly. That relative scarcity and the difficulty of rapidly increasing supply are core reasons gold maintains value.
Why do investors buy gold in Canada?
Gold is a commodity: a standardized, globally traded physical asset. Unlike many commodities, you can store a useful quantity of it privately, and it does not corrode or spoil, so it can be held indefinitely. As an investment, gold does not generate income—no interest or dividends—so its return comes entirely from price changes driven by supply and demand.
Historically, gold has tracked inflation over the very long term and has functioned as a store of value and a medium of exchange. Central banks still hold gold to help backstop confidence in national currencies, and in many developing economies gold remains a preferred store of wealth compared with local cash or electronic balances.
What drives gold prices?
Understanding where demand originates helps explain gold’s price movements. Key players include:
- Central banks, which can be large buyers or sellers of gold reserves
- Investors seeking safety during periods of economic or market stress
- Consumers in rapidly growing markets such as India and China, where cultural demand for jewellery and bullion is strong
The rally in 2024 reflected significant net purchases by central banks, particularly in emerging markets. Geopolitical events and sanctions that constrained access to certain currencies encouraged some nations to diversify reserves into gold. At the same time, holdings in gold exchange-traded funds (ETFs) have fallen from earlier peaks, suggesting investor demand could rise further if equity markets weaken.
How to buy gold in Canada
There are three primary ways Canadians can gain exposure to gold:
- Physical gold. You can buy jewellery, coins or bars from dealers, some jewellers, or retailers that offer bullion. Pros: direct ownership and tangible value in extreme scenarios; cons: storage, insurance and theft risk, plus fees that reduce returns.
- ETFs and other securities backed by physical gold. Through a brokerage account you can purchase ETFs that hold gold in vaults, giving price exposure without storage hassles. Futures exist but are generally less suitable for most retail investors due to contract expiry and delivery obligations. Pros: liquidity and convenience; cons: small management fees and no physical possession.
- Shares of gold producers and exploration companies. Buying miners’ stock or sector ETFs is effectively investing in companies that extract gold. Pros: potential for capital gains and sometimes dividends if companies are profitable; cons: company-specific risks and operational costs mean shares don’t move in lockstep with the metal’s spot price.
Your choice will depend on your time horizon, tolerance for risk, and the intended role of gold in your portfolio—liquidity, a hedge, or speculative exposure.
History of gold prices
The performance comparison between gold and other asset classes changes with the time frame considered. Many studies start in 1971, when the U.S. dollar was detached from gold. Since that era, gold has delivered an annualized return in the neighborhood of 8%—below the long-run returns of major stock indices but generally above long-term bond returns. Gold tends to struggle when real interest rates are high because investors favor yield-bearing assets. Its surges are often sharp but sometimes short-lived, as seen in past peaks around 1980, 2011 and 2020.
Can gold hedge against chaos?
Gold’s appeal during crises is rooted in history and liquidity. During eras of high uncertainty—financial crises, geopolitical shocks or severe inflation—investors often seek assets outside the control of any single government. Unlike fiat currencies, which can be expanded by central banks, gold’s supply is relatively fixed, making it attractive as a crisis hedge.
Gold typically trades inversely to the U.S. dollar: when the greenback weakens, gold often strengthens, and vice versa. In recent years, cryptocurrencies have attracted attention as alternative stores of value because they, too, claim scarcity. However, crypto markets remain far newer and more volatile, and over time crypto has shown at best a weak positive correlation with equities. Gold, by contrast, has centuries of history as a hedge against extreme inflation and deflation scenarios.
How much gold should you hold?
Because it produces no income and can be volatile, gold is rarely appropriate as a core holding for most investors. As a modest allocation—commonly less than 10% of a diversified portfolio—it provides specific benefits:
- Diversification. Gold typically has a low correlation with stocks and bonds, which can reduce overall portfolio volatility.
- Protection against uncertainty. In periods of political or financial stress, gold’s fixed-supply attributes and broad acceptance can help preserve purchasing power.
- Inflation hedge. Over long spans, gold has tended to hold value relative to consumer prices, making it a potential safeguard against long-term currency erosion.
Deciding how much gold to hold should reflect your objectives, risk tolerance and whether you want liquidity or tangible assets you can possess directly.
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- Should you hold gold in a RRIF?
- Recent developments in cryptocurrency markets and platforms
- When holding on to stocks can hurt you financially
- How to increase small-cap exposure with ETFs
- Reviews of popular online brokerages available in Canada