Gold is up twenty-two percent year to date as of early May 2026. Spot price closed Tuesday at three thousand four hundred ninety-five dollars per ounce. The S&P 500 is up seven percent. Bitcoin is flat. Bonds are up six percent on the Bloomberg US Aggregate index. Gold is the best performing major asset class so far this year, and the fundamental case suggests the trend has more room.
Why gold is moving. Three drivers. First, oil is at one hundred twelve dollars Brent and one hundred four dollars WTI, the highest since 2022. Higher oil feeds inflation through fuel, shipping, and food costs. The latest CPI print came in at 3.1 percent versus expectations of 2.8. Sticky inflation forces the Fed to keep rates higher than the market wanted, which would normally hurt gold. But the gold move suggests investors expect inflation to outrun rate hikes. Second, the dollar is weakening. The DXY index is at 96.8, down from 104 a year ago. Dollar weakness is a tailwind for gold because gold is priced in dollars. Third, central bank buying. The World Gold Council reported central banks added 1,037 metric tons of gold to reserves in 2025.
The portfolio role. Gold is not an income asset. It does not pay a dividend. It does not generate earnings. The case for gold is uncorrelated returns and currency hedging. Over the last twenty-five years, gold has had a correlation of 0.05 to the S&P 500 and negative 0.12 to the Bloomberg Aggregate Bond index. Adding five to ten percent gold to a 60-40 portfolio reduces volatility and improves risk adjusted returns in most historical backtests.
How much to allocate. The standard recommendation from major asset allocators ranges from three percent to ten percent. Vanguard does not recommend gold in its core target funds. BlackRock recommends three to five percent in its model portfolios. Bridgewater holds 7.5 percent. Ray Dalio personally has said ten percent is appropriate for most investors. The right number depends on your inflation exposure and other diversification.
How to own gold. Three main paths. Physical bullion. ETFs. Mining stocks. Each has tradeoffs.
Physical gold means coins or bars. American Gold Eagles, Canadian Maple Leafs, and Krugerrands are the most liquid coin options. Bars come in one ounce up to one kilogram sizes. The dealer markup is two to five percent on coins and one to three percent on bars. Storage is your problem. Home safes, bank safe deposit boxes, or paid storage at a depository like Brink's. Storage costs run zero point two to one percent annually. The advantage is direct ownership with no counterparty risk. The disadvantage is friction.
Gold ETFs are the easiest path. SPDR Gold Trust, ticker GLD, is the largest with seventy-eight billion in assets and a 0.40 expense ratio. iShares Gold Trust, IAU, is similar at 0.25. SPDR Gold MiniShares, GLDM, charges only 0.10. All three hold physical gold in vaults and trade at near net asset value. The ETF is taxed as a collectible at twenty-eight percent on long term capital gains rather than the standard fifteen or twenty percent rate, which matters for taxable accounts.
Mining stocks are leveraged plays on gold. When gold goes up ten percent, well managed gold miners often go up twenty to thirty percent because their cost structure is fixed and the additional revenue flows to profit. The Vaneck Gold Miners ETF, GDX, holds the major miners and trades at a 0.51 expense ratio. The downside is operational risk. Mines flood, governments raise royalties, management makes bad acquisitions.
What I would do. For an investor with a balanced portfolio looking to add gold for the first time, allocate five percent of total portfolio to GLDM in a tax advantaged account if possible. Build the position over three to six months to dollar cost average. Rebalance annually. Do not chase the price.
The risks. Gold could correct. The metal had a thirty percent drawdown from August 2020 to October 2022. Gold returns are lumpy. There can be ten year stretches with no positive return, like 1980 to 2001. The case for gold is not that it always goes up. The case is that it diversifies and hedges currency and inflation risk in ways stocks and bonds cannot.
The Fed meets May sixth and seventh. Markets are pricing a sixty-four percent probability of a June cut. If the Fed signals dovishness gold likely runs higher. If the Fed sounds hawkish gold could pull back. Position size accordingly and ride the cycle.
