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All images are from the “Invest in Gold” White Paper Q3 2025, by the SPDR® Gold Strategy Team.
Since the start of the year, gold prices have soared over 31%. This headline-grabbing figure has largely been down to a perfect storm of rising geopolitical uncertainty and armed conflicts, as well as the heightened inflation environment.
Beyond the recent headline returns, gold has historically delivered strong performance in the longer term as well. Over the past 30 years, gold has returned approximately 7.4% p.a., marginally behind Global Equities.
Interestingly, in the last 10-year and 20-year investing horizons, gold outperformed all major asset classes, including Global Equities.
Given the glittering performance of gold in both the short- and long-term, the potential merits of buying gold are evident. But, just how much gold exposure should you have?
The Permanent Portfolio Theory: Suggests Up To 25% Allocation To Gold
Popularised by investment analyst Harry Browne in the 1980s, the Permanent Portfolio Theory advocates equal portfolio allocation to stocks, bonds, gold and cash (or Treasury Bills).
While having a quarter of your portfolio in gold can feel extreme, the actual goal is broadly diversifying your portfolio across major asset classes. When one of the asset classes performs poorly, the others can potentially offset the losses – minimising overall portfolio volatility and providing more stable returns through economic ups and downs.
A Portfolio Stabiliser: Consider Gold Exposure Between 2% And 10%
Besides its relatively strong returns over the long term, one of the main functions of gold is to act as a portfolio stabiliser – limiting portfolio drawdowns during major market crashes.
This can be attributed to its low correlation and beta to a global stock and bond portfolio.
The chart below shows that gold has a low correlation (blue bars) to a 60/40 Global equities and bond portfolio. A low correlation means that when the model 60/40 global portfolio crashes or soars, there isn’t a significant impact on the gold market.
At the same time, gold also displays a low beta to the model portfolio (green bars).
A low beta highlights that the gold prices move relatively independently to global equity and bond markets. Instead, the market for gold is driven by its own fundamentals – including demand from jewellery, the technology sector, central banks, investment, as well as changes in global supply.
Traditionally, low-beta investments tend to also mean lower returns. But, gold’s returns has proven to be competitive over the long-term.
By injecting gold into your investment portfolio, you can potentially improve your returns and reduce your portfolio risk. To see how this plays out, we can look at four hypothetical portfolios, comprising Global Equities, Global Bonds and Alternatives, by the SPDR® Gold Strategy Team.
These portfolios are depicted below, with the only differences being:
– Allocations to MSCI All Country World Index (ACWI) for Equity exposure;
– Allocations to Bloomberg Global Aggregate Government Bond Index for Fixed Income exposure; and
– Allocations to Gold for Alternatives exposure.
The additional Gold exposure in each portfolio was taken from the Equity and Fixed Income allocations equally. For example, Portfolio B has 2% of gold exposure – which means its exposure to Equity and Fixed income reduced by 1% each. The rest of the portfolio allocations remained the same.
The SPDR® Gold Strategy Team analysed the portfolios’ risk and returns over 20 years, from 1 January 2005 to 30 June 2025 – and found that not only did the portfolios’ maximum drawdowns reduce with additional gold exposure, but it also boosted overall returns.
Compared to a portfolio with 0% gold allocation (Portfolio A), adding just 2% of gold exposure (in Portfolio B) resulted in positive outcomes for the portfolio – improving annualised returns, as well as reducing the maximum drawdown.
Adding incremental amounts of gold exposure further improved the portfolio’s risk-reward metrics – with 10% gold exposure (in Portfolio D) resulting in the highest annualised return of 6.18% and the lowest maximum drawdown of 31.68%.
No One-Size-Fits-All Amount, But Some Gold Exposure Is Better Than None
Harry Browne’s Permanent Portfolio Theory may argue for 25% allocation, while the Invest in Gold White Paper by the SPDR® Gold Strategy Team found that having as little as 2% exposure can start improving the risk-reward metrics of your long-term portfolio.
Gold exposure can stabilise your portfolio in the long-term, through its low correlation and low beta to global equities and bonds, as well as offer a hedge in times of macroeconomic stress, such as the simmering geopolitical tensions and persistent inflation today.
While we’ve highlighted various benefits, you also have to understand the constraints of investing in gold.
For a start, gold does not provide an income – which some investors may rely on for their daily expenditure, especially in retirement. The good news is that the research shows that even a small gold exposure can have a positive impact on your overall investment portfolio – which may contain dividend-paying equities and fixed income assets.
Buying and storing physical gold may also come with security and liquidity challenges, as well as potentially opaque transaction costs.
You can get around this by investing in a Gold ETF, as it can be bought and sold like stocks on a stock exchange and offers transparent buying and holding costs, involving a brokerage commission and the recurring ETF expense ratio that includes the ETF management and custody of the gold bars.
For example, the SPDR® Gold Shares, one of the largest and most liquid ETFs1 globally, has an expense ratio of 0.40% that is transparently listed on its factsheet.
Read Also: 4 Ways Singapore Investors Can Invest In Gold
1 Bloomberg Finance L.P. & State Street Global Advisors, data as of July 16, 2025. SPDR Gold Shares commenced operations on November 18, 2004. Note SPDR Gold Shares AUM is $101.25 billion and 180-day average daily trading volume is $2.6 billion. 180-day average daily trading volume includes 180 trading days.
Important Disclosure: Sponsored by State Street Global Advisors Singapore Limited (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell an investment. It does not take into account any investor’s particular investment objectives or investment horizon. The prospectus in respect of the Singapore offer of the SPDR® Gold Shares (the ‘Shares’) is available at https://www.spdrgoldshares.com/singapore/. The value of Shares may fall or rise. Investors should read the prospectus before deciding whether to purchase Shares. Shares in the Trust are not obligations of, deposits in, or guaranteed by, World Gold Trust Services, LLC, SSGA or any of their affiliates. You may wish to seek advice from a financial adviser before making a commitment to purchase Shares. In the event that you choose not to seek advice from a financial adviser, you should consider whether the Trust is suitable for you. Investors have no right to request the Sponsor to redeem their Shares while the Shares are listed. It is intended that holders of Shares may only deal in their Shares through trading on the SGX-ST. Listing of the Shares on the SGX-ST does not guarantee a liquid market for the Shares.
For more risk and additional information, please visit https://www.ssga.com/sg/en/individual/capabilities/alternatives/gold
Diversification does not ensure a profit or guarantee against loss.
Past performance is not necessarily indicative of the future performance.
Assets may be considered “safe havens” based on investor perception that an asset’s value will hold steady or climb even as the value of other investments drops during times of economic stress. Perceived safe-haven assets are not guaranteed to maintain value at any time.
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