My Gold Investment Strategy

xiaoqing included in category Investment

2026-02-03 2026-02-03 869 words 4 minutes

Gold has soared and fallen recently. Can it still be invested now? This paper deeply analyzes the underlying logic of gold investment, combined with Rui Dalio's asset allocation suggestions, compares the advantages and disadvantages of savings, physical gold, ETF and futures in detail. Share your personal understanding of gold investment: 'there is no risk of allocating gold, which is greater than the risk of high gold prices' to help you build a defensive portfolio against inflation.

Contents

With Gold Soaring and Plunging, Is It Still a Good Investment? Sharing My Understanding of Gold.

Gold has recently seen violent fluctuations—skyrocketing and then plummeting. Many are asking: Is it still safe to invest? Here is my take on gold investment.

The core purpose of investing in gold is to improve portfolio diversity, hedge against inflation, offset risks, and seek safety. It is crucial to be clear on one thing: Gold is for long-term asset allocation, not for short-term speculative riches.

Ray Dalio, founder of Bridgewater Associates, suggests that gold should make up 5% to 15% of an investment portfolio. particularly in the current context of ballooning global debt, he advises leaning towards the higher end, allocating 10% to 15%.

Gold is a medium for storing wealth. It cannot be replicated (unlike paper currency which can be printed infinitely), and its confiscation risk is very low—it is difficult for governments or banks to freeze it or artificially devalue it. However, gold itself does not generate value, nor does it yield interest. Its long-term returns are correlated with the money supply (M2), with a long-term real annualized compound return rate of approximately 2.0% to 3.6%.

Of course, gold prices will not rise forever; history shows periods of prolonged decline. Regarding a drop in the price of gold within my portfolio, my mindset is this: Allocating gold is like buying insurance for my investments. If it falls, I treat it as paying the insurance premium for renewal; if it keeps rising, it’s like receiving an insurance payout.

1 The Forms of Gold Investment

There are several ways to invest in gold, each with its own pros and cons:

1. Gold Accumulation Plans (Paper Gold) Suitable for those who want long-term holdings but don’t want to store it themselves. This is equivalent to lending your gold to the bank; the bank keeps it for free and may even pay you some interest. However, there is a critical prerequisite: The bank must keep its promise. There is a liquidity risk (the risk of being unable to redeem or sell), especially during violent market volatility when banks may restrict trading. Essentially, this is lending gold to a bank in exchange for interest.

2. Physical Gold This is true “hard currency.” In times of turmoil (war, economic collapse, collapse of national credit), physical gold can help you survive. The risks are that during chaotic times, the state may prohibit the possession of gold (refer to the Gold Yuan era in the Republic of China), and there is the risk of theft/robbery. Therefore, for self-custody, I suggest keeping gold that is small, easy to hide, or melted down into small nuggets or dust. Because it resists inflation and truly stores wealth, it is suitable for long-term holding.

3. Gold ETFs / Funds These offer good liquidity and are suitable for medium-to-short-term investment, primarily to hedge against “Black Swans,” war, and disasters. Since these are financial products, in extreme scenarios, they carry systemic risk (trading at a discount or premium), liquidity risk, and hidden costs (value decay, management fees, custodian fees, transaction fees). The worst-case scenario involves credit risk, where the fund is liquidated, becoming mere “paper wealth.”

4. Gold Futures High liquidity, flexible, and allows for two-way trading (long or short). Because leverage is involved, capital efficiency is amplified, but the risk is extreme. Due to the costs of rolling over positions (wear and slippage), it is not suitable for long-term investment.

2 My Gold Investment Strategy

I primarily choose Gold ETFs and Physical Gold as my investment targets.

Gold ETFs: Convenient trading and low fees make them suitable as part of my asset allocation.
Physical Gold: This is for “Gold in Chaotic Times”—to cope with future extremes (war, unrest, economic crisis). It serves as a survival chip and a hedge against inflation in peacetime. I plan to buy at a suitable price (I still find the current price of over 1000 RMB/g a bit expensive), prioritizing small, concealable, and portable formats.

I dynamically adjust my allocation ratio, keeping it between roughly 5% and 15%. When market risk is high, I increase the proportion of gold. My current target is 10%, with a strategy of adding to my position when prices dip.

I don’t think high gold prices are the problem. The real issue is: The risk of not allocating gold is greater than the risk of gold prices being high. Therefore, regardless of the price, I will maintain an allocation, though naturally, buying at a low point is best.

Finally, I want to say that assets are not equal to money. Until an asset is converted into real money, it is just paper wealth. In times of turmoil, all financial products and paper currency can become worthless. Only physical goods (gold, food, water, energy, materials, etc.) are hard currency, and among these, gold is more suitable than any other physical commodity to serve as a medium of exchange.