Gold shows up in a lot of portfolio conversations, especially when markets get shaky. Here is a clear-eyed look at why some Canadian investors hold it, how they hold it, and what trade-offs come with that decision.
Gold occupies an unusual place in investing. It produces no earnings, pays no dividend, and has no intrinsic cash flow to discount — yet it has held a role in portfolios for a very long time. The main argument investors make for holding it is diversification: gold's price behaviour does not always move in step with stocks and bonds, so adding a small position can, in theory, smooth out some of the bumps in a portfolio's overall return path. It is worth being precise about the claim, though. Gold is not guaranteed to zig when equities zag — there have been stretches where gold and stocks fell together — but over long periods its correlation to equities has tended to be lower than the correlation between, say, two different stock sectors.
Two related but distinct arguments come up often. The first is that gold acts as a store of value during periods of high or rising inflation, since it is not tied to any single currency or government's monetary policy. The second is that gold tends to attract demand during acute crises — geopolitical shocks, banking stress, sharp equity drawdowns — as investors look for an asset perceived as being outside the financial system. Both arguments have some historical support, but neither is a law of markets. Gold has gone through long periods of underperforming inflation, and it has occasionally sold off during crises when investors needed cash and sold whatever was liquid, gold included. Treat these as tendencies, not guarantees.
There are several practical routes into gold and precious metals, each with different costs, risks, and logistics.
Each route has different tax and account implications, and fee structures vary by product, so it is worth reading the fund facts or prospectus for any specific ETF rather than assuming all gold exposure behaves the same way.
It is just as important to be clear about gold's limitations as its potential benefits.
Physical gold and most gold ETFs pay no interest or dividend. Whatever return an investor gets comes entirely from the price of gold moving up (or down) over the holding period. Compare that to a dividend-paying stock or a bond, which can generate return even in a flat price environment. Holding gold means giving up that yield component entirely, and holding cash-generating assets instead has an opportunity cost that is worth weighing against gold's diversification appeal.
Gold's price can swing significantly over shorter periods, and it has gone through extended multi-year stretches of doing very little, or declining, while other asset classes moved ahead. There is no dependable formula that predicts when gold will do well or poorly relative to stocks and bonds. Investors who hold it should be prepared for it to be a drag on returns during long bull markets in equities, in exchange for the diversification it may offer during other periods.
There's no universal answer -- the case for a small position versus skipping gold altogether.
Among investors and advisors who do use gold, a common approach is to treat it as a small slice of the overall portfolio — often discussed in the context of a modest single-digit percentage — rather than a core holding. The reasoning is straightforward: a small allocation can provide some diversification benefit without meaningfully dragging down long-term returns if gold underperforms for an extended stretch, given it generates no yield of its own. There is no universal number that is correct for every investor, and how much (if any) gold makes sense depends on an individual's broader mix of assets, time horizon, and how they feel about volatility — not something a general article can prescribe. Some investors choose to hold no gold at all and rely on bonds, cash, or geographic diversification for the same portfolio-smoothing purpose; that is also a defensible choice.
Canada has a distinct relationship with gold and mining as an industry — the TSX and TSX Venture Exchange list a large number of gold and mining companies, and Canada is a significant global gold producer. That gives Canadian investors easy access to both physical-gold-backed ETFs and mining-sector ETFs listed domestically, often priced in Canadian dollars, which removes a layer of currency conversion for investors who want to avoid extra U.S.-dollar exposure. It is worth noting, though, that a Canadian-dollar-denominated gold ETF still reflects the price of gold as set in global markets (typically quoted in U.S. dollars), so currency movements between the loonie and the greenback can still affect the return a Canadian investor experiences, even when the fund itself trades in CAD.
Whatever an investor decides about gold, one practical challenge is simply keeping track of it alongside stocks, ETFs, and other holdings in a way that shows the full picture. WealthWise lets Canadians link their accounts or enter holdings manually to see a gold or precious-metals position in context — its weight relative to the total portfolio, how it has moved over time, and how it fits next to everything else — rather than tracking it in a separate spreadsheet disconnected from the rest of the plan.
Gold is neither a magic hedge nor a relic to dismiss outright. It is an asset with a specific role — no yield, potential diversification, historical (not guaranteed) inflation and crisis behaviour — that some investors choose to hold in a measured way and others skip entirely. The right choice depends on an individual's own goals, time horizon, and comfort with a non-yielding, sometimes-volatile asset, and this article does not substitute for professional financial advice tailored to your situation.
Gold has historically been used as an inflation hedge because it is not tied to any single currency, but the relationship is not consistent or guaranteed. There have been extended periods where gold underperformed inflation, so it should be viewed as a potential partial hedge rather than a reliable one.
| Physical bullion | Gold ETFs | |
|---|---|---|
| Ownership | Direct ownership | Trades like a stock on the TSX |
| Logistics | Requires storage and insurance | Easy to hold in a regular or registered brokerage account, avoids storage logistics |
| Buying/selling | Can be less convenient to buy and sell, and to resell at a fair spread | Generally easy to buy and sell |
| Costs | Storage and insurance considerations | Involves fund-level fees and reliance on the ETF structure |
Weighing the trade-offs between owning gold directly and owning it through an ETF.
It depends on the investor's priorities. Physical bullion means direct ownership but requires storage and insurance and can be less convenient to buy and sell. Gold ETFs trade like stocks, are easier to hold inside a regular or registered brokerage account, and avoid storage logistics, though they involve fund-level fees and reliance on the ETF structure.
There is no universal answer. Some investors who choose to hold gold keep it to a small slice of their overall portfolio to limit the drag from its lack of yield, while others avoid it entirely and rely on bonds or other assets for diversification. The right amount, if any, depends on individual goals and risk tolerance, and is worth discussing with a financial advisor.
| Gold (bullion/ETF) | Gold mining stocks | |
|---|---|---|
| What it is | Direct exposure to the metal's price | Equities in companies that extract gold |
| Risk factors | Exposure to the gold price itself | Business risk, operating costs, and stock market risk in addition to exposure to the gold price |
| Behaviour vs. gold price | — | Can behave quite differently from the price of gold itself, often with larger swings in both directions |
Mining stocks add company and equity-market risk on top of gold price exposure.
No. Mining company shares are equities that carry business risk, operating costs, and stock market risk in addition to exposure to the gold price, so they can behave quite differently from the price of gold itself, often with larger swings in both directions.
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