Gold has reached a new peak, surpassing $4,000 an ounce, a milestone that has Wall Street in an uproar. With the metal hitting new highs, veteran hedge fund manager Ray Dalio has urged investors to allocate as much as 15% of their portfolios to gold as debt burdens, inflation and government spending undermine confidence in paper assets and fiat currencies. Industry experts say there is still room for gold. “We are now targeting $5,000 by 2026. If it continues on its current path, it could reach $10,000 before the end of the decade,” said Ed Yardeni, president of Yardeni Research, in a note published Wednesday. In addition to the Federal Reserve's shift toward rate cuts and political uncertainty in the US, a wave of central bank buying and renewed institutional interest have supported gold's surge. However, Nicky Shiels, head of metals strategy at MKS Pamp, warns that gold trading could get busy: “Tactically, gold has risen too much, too quickly – $500 in 25 days – and is about 25% above the 200-day moving average,” she said. “Historically, a premium above 20% is short-lived,” Shiels added, expecting room for a decline towards $3,600. For investors convinced by Dalio, these are the top ways to gain exposure to the metal. Gold bars and jewelry Gold bars are useful when the goal is a long-term buy-and-hold position for investors looking to diversify their portfolio, and with the potential for transfer to the next generation where short-term price movement is less relevant, says Gautam Chadda, head of strategic advisory in Asia at RBC Wealth Management. Jüerg Kiener, CEO of Swiss Asia Capital, added that “true ownership” of gold matters because exchange-traded instruments such as ETFs are tied to agreements that could potentially limit exits. Some funds, especially those that hold physical gold or operate in less liquid markets, may impose a gate – a limit on redemptions – if too many investors try to cash out. “Ownership of the metal is key,” he told CNBC. However, other strategists noted that physical gold may not be the most cost-effective when it comes to asset investing. “You need to find a safe place to store it, especially for gold bars,” said Eddy Loh, CIO of Maybank Group Wealth Management. The same concern applies to jewelry, which is also a traditional way of holding gold. “Older generations like this, but resale value can be a challenge; you usually have to sell at a discount,” says Loh. Manufacturing costs and retail surcharges also mean that buyers generally pay above spot prices. ETFs: liquid and cheap? For asset managers and retail investors in particular, exchange-traded funds remain a better way to take a position in gold. “If I want exposure to gold in a multi-asset portfolio, I think ETF is my preference,” Loh said. “It's liquid, expense ratios tend to be slightly lower and it follows the gold price closely.” Portfolio manager Brian Arcese of Foord Vermogensbeheer agrees, but advises healthcare in product choice. “For retail investors, we recommend purchasing physical gold through ETFs. More importantly, investors should choose an ETF that is backed by physical gold itself and not created through the use of derivatives,” he said. A physically backed gold ETF holds gold bars in vaults. ETFs that use futures contracts rely on counterparties such as banks and brokers to fulfill contracts and roll out futures. The downsides can include counterparty risk for the manager and custodian, and it can be difficult to exchange ETF units for physical gold, RBC's Gautam said. “Investors also need to understand the different types of ETFs and how they gain exposure, so some due diligence will be required when choosing an appropriate instrument. Not all ETFs are created equal,” he said. CEO of Sprott Asset Management John Ciampaglia said physically backed funds are “the easiest and most convenient way to access London Good Delivery gold bars.” He pointed to the Sprott Physical Gold Trust, traded in New York and Toronto, with bullion stored at the Royal Canadian Mint. Gold Mining Stocks Gold miners can provide leverage if the precious metal continues to rise, but holding stocks carries a different risk profile, according to market strategists. Arcese notes that miners are “a relatively high beta way to gain exposure – their stock prices will be much more volatile than gold itself.” Still, he says some are “not pricing in the current spot price,” meaning gains could surprise if gold were to remain at $4,000. The NYSE Arca Gold Miners Index, which tracks major publicly traded gold companies and companies worldwide, is up 126% so far this year, LSEG data shows. The MVIS Global Junior Gold Miners Index is up 137% over the same period. Spot gold prices are up 53% so far this year. Holding gold mining stocks involves company-specific risks. “Operational issues such as floods or accidents could derail returns even if gold prices rise,” Maybank's Loh warned. For those looking for a basket approach, Ciampaglia suggests the Sprott Gold Miners ETF (SGDM), which owns some of the largest producers. But he and Kiener cautioned that popular mining stock ETFs, such as the VanEck Gold Miners ETF(GDX) and VanEck Junior Gold Miners ETF(GDXJ), may be useful for traders but may not be optimal long-term vehicles due to other embedded costs such as management fees, portfolio turnover and trading spreads.
