Gold’s rally: what to do now with rising prices
Gold has surged past US$5,000 an ounce. This explains why prices climbed and lays out practical options for investors deciding whether to add, hold or trim exposure.
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By Torontoer Staff
Gold has climbed to fresh highs, topping US$5,000 an ounce after a yearlong rally that added more than US$2,000 to the price. Investors who missed the early gains are asking if they should still buy, hold or take profits.
Why prices have jumped
Several forces have pushed gold higher. A weaker U.S. dollar, persistent inflation fears, and geopolitical uncertainty have increased demand for hard assets. Central banks have also been accumulating gold for reserves, adding a steady source of institutional demand.
Policy and political shifts have intensified those trends in the past year. Trade tensions, questions about central bank independence and higher defence spending in many countries have all supported bullion as a hedge against economic and geopolitical risk. The market moved past US$3,000 in February and US$4,000 in October on its way to the current level.
Bull markets are associated with strong capital flows, and these capital flows are just dwarfing the finite physical supply.
Max Layton, commodities analyst, Citigroup
You may already have exposure
Many Canadian investors already carry indirect exposure to gold through the stock market. Major producers such as Agnico Eagle and Barrick Gold are among the country’s largest companies and have helped lift the S&P/TSX Composite and S&P/TSX 60 indexes. Smaller gold miners, which tend to be more sensitive to bullion prices, have often outperformed both the metal and the large producers.
Practical options for investors
Deciding what to do depends on your goals, time horizon and tolerance for volatility. Consider these common approaches.
- Hold: If you already have exposure through physical gold, ETFs or miner stocks and your allocation matched your plan, rebalancing rather than selling can lock in gains while keeping asset allocation intact.
- Buy bullion or coins: Physical gold provides direct ownership and can be useful as a long-term hedge. Storage and insurance add cost, and liquidity can be slower than paper investments.
- Buy an ETF: Gold ETFs offer immediate exposure, low transaction costs and easy trading through a brokerage account. Compare expense ratios and whether the fund holds physical metal or derivatives.
- Buy miner stocks: Shares in producers can amplify price moves because rising bullion tends to boost margins. They also carry operational and company-specific risks, and can lag the metal in periods of rapid price gains.
- Consider royalty and streaming companies: These firms collect royalties on production and often have lower operating risk than miners while still benefiting from higher metal prices.
The equities are cheap versus bullion, with the equities not tracking at the same pace as the gold price and therefore valuations have room to move upward.
Tanya Jakusconek and analysts, Bank of Nova Scotia
Risks to keep in mind
Gold is marketed as a safe haven, but it is not immune to reversals. If geopolitical tensions ease or the global outlook becomes more predictable, the premium investors pay for safety could shrink and prices could retreat. Supply dynamics can also change, and high prices can encourage more production and hedging activity.
Analysts do see further upside if current holders become reluctant to sell, constraining supply and pushing prices higher. Some have suggested scenarios that could bring prices toward US$6,000 an ounce, but such outcomes depend on investor behaviour and broader macro conditions.
How to size a position
Treat gold as insurance rather than a primary growth asset. Financial planners commonly recommend keeping safe-haven allocations modest, often a single-digit percentage of a diversified portfolio, though the exact share should reflect personal objectives and risk tolerance.
If you are unsure, consider a staged approach: scale into a position over time, set target limits for how much of your portfolio you want in bullion or miners, and use periodic rebalancing to lock in gains or limit exposure.
Bottom line
Gold’s rally has already rewarded many investors, directly and indirectly. New buyers should decide what role bullion will play in their overall plan, weigh the trade-offs between physical metal, ETFs and miner stocks, and keep allocations disciplined. For most investors, a measured, long-term approach and attention to portfolio balance will serve better than chasing momentum.
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