The short answer

Gold can complement a broadly diversified portfolio because its price responds to drivers that differ from company profits and running bond income. During severe market stress, that independence can be useful: a liquid gold holding may offset part of the losses elsewhere and provide room to rebalance.

That is neither a guarantee nor a reason to replace equities, bonds or an emergency cash reserve. Gold pays no interest or dividend, may decline for years and physical ownership entails a premium, resale spread, storage and potentially insurance. The relevant question is therefore not ‘gold or a portfolio?’ but which limited job gold should perform within the whole portfolio.

Why gold may diversify

Diversification arises when assets do not permanently rise and fall in step. Gold is influenced by real yields, currencies, reserve policy, physical demand and confidence in financial systems. Some of those drivers differ from those of global equities and bonds. An allocation can therefore change total-portfolio volatility even though gold itself remains volatile.

A study by Dirk Baur and Brian Lucey in the peer-reviewed Financial Review found gold to be a hedge against equities on average in the US, UK and German data examined, and a safe haven during extreme equity-market conditions. The authors also found that this safe-haven property was short-lived. Their result describes specific historical data; it is not a promise for every crisis, currency or holding period.

What the UZH study by Thorsten Hens and Alvin Amstein found

Thorsten Hens and Alvin Amstein examined portfolio allocations through Modern Portfolio Theory, optimal wealth growth and Prospect Theory in the University of Zurich commissioned study ‘Gold for Long-Term Wealth Accumulation’, published in February 2025. According to UZH, they considered historical data since 1972, US-dollar and Swiss-franc reference currencies, taxes, transaction costs and counterparty risks.

The official UZH summary reports that the modelled optimal gold allocations averaged ten per cent across the cases studied and rose with greater risk aversion or an international equity focus. This does not create a universal ten-per-cent rule: Bank von Roll financially supported the commissioned research, no DOI is listed, and the results depend on the sample, model, currency, costs, taxes and rebalancing. The careful conclusion is that the analysis supports a possible portfolio role for gold—not the same allocation for every person.

Gold as a crisis reserve—with limits

Gold has no issuer default risk when it is held directly and ownership is unambiguous. That may matter to investors seeking a transferable reserve asset beyond the promise of any single company. In an equity downturn, a liquid gold holding may also be sold to replenish underweight assets without first selling equities after a fall.

A crisis reserve is not the same as a stable price. Gold responds to interest rates, dollar moves and demand for liquidity, and can fall at the start of a market shock. Cash sized for near-term expenses remains more important because the sale price, settlement and immediate availability of physical gold are not guaranteed.

Why there is no universal gold allocation

A defensible weight depends on the objective, time horizon, capacity for loss, existing assets and the currency of future spending. Property, business ownership or an existing exposure to commodities can materially change the starting point. Someone likely to need money during a downturn requires a different structure from an investor with stable reserves and a long horizon.

Percentages produced by historical optimisation are sensitive to the start date, return assumptions and risk measure. They can inform scenarios but cannot replace personal financial planning. A constructive process starts by naming the function—diversifier, crisis reserve or long-term tangible-asset component—and only then defines a limited target range.

Physical gold, an exchange-traded product or mining shares?

Physical investment gold provides direct ownership but entails a purchase premium, resale spread, secure custody and perhaps insurance. Exchange-traded products can be easier to trade and rebalance in small amounts, but their legal form, backing, custody, fees, liquidity and counterparties require scrutiny. The word ‘gold’ in a product name does not itself prove a claim to specified bars.

Gold-mining shares are company ownership, not a substitute for bullion. Their value also reflects extraction costs, management, financing, reserves, political risk and equity-market sentiment. They can move more than the gold price in either direction. Bullion, a security and a mining company should therefore be treated as different risk components.

Use a rule rather than headlines

A target range can prevent a strongly rising position from quietly dominating the portfolio. Rebalancing means returning actual weights to the intended structure at a sensible interval or after a pre-defined band is crossed. It can be counter-cyclical, but it also creates transaction costs, spreads and, depending on the jurisdiction, taxes.

Investors should document the instrument held, the custody and total cost, and the conditions under which it would be bought or sold. For many long-term plans, an annual portfolio review is easier to apply than reacting to daily price moves. This discussion is general information, not personal investment advice.

Frequently asked questions

Concise answers based on the explanations above. The full section provides the relevant detail and limitations.

What should readers know about “The short answer”?

Gold can complement a broadly diversified portfolio because its price responds to drivers that differ from company profits and running bond income. During severe market stress, that independence can be useful: a liquid gold holding may offset part of the losses elsewhere and provide room to rebalance.

Why gold may diversify?

Diversification arises when assets do not permanently rise and fall in step. Gold is influenced by real yields, currencies, reserve policy, physical demand and confidence in financial systems. Some of those drivers differ from those of global equities and bonds. An allocation can therefore change total-portfolio volatility even though gold itself remains volatile.

What the UZH study by Thorsten Hens and Alvin Amstein found?

Thorsten Hens and Alvin Amstein examined portfolio allocations through Modern Portfolio Theory, optimal wealth growth and Prospect Theory in the University of Zurich commissioned study ‘Gold for Long-Term Wealth Accumulation’, published in February 2025. According to UZH, they considered historical data since 1972, US-dollar and Swiss-franc reference currencies, taxes, transaction costs and counterparty risks.

Sources and editorial basis

Key statements were reviewed against the following primary sources and institutions. Last source access and editorial review: .