What to consider with gold as it soars past $5,100

The price of gold reached a new all-time high of $5,100 as investors clamour for a piece of the market.  

Having enjoyed a recent boost triggered by investor concerns about Donald Trump's spat with Europe over Greenland, gold has been pushed yet higher by tensions within America, the possibility of intervention to address yen weakness and the potential for another government shutdown in Washington.

Since August 2024, gold has doubled. A weaker US dollar makes gold more affordable for buyers using other currencies. Sticky inflation has also led to more people buying gold as a natural hedge.

The precious metal is often viewed as a ‘safe haven’ asset when markets fall or when there is heightened uncertainty in the world such as when the US carried out strikes on Venezuela in early January

But does gold deserve to be a part of your asset allocation? Naturally, this will largely depend on factors like your risk tolerance and where your assets lie already.

It has the power to be a strong portfolio diversifier, but gold can also be a bit of an erratic asset. It has a relatively weak correlation with equities and bonds, so the pricing can be unpredictable and fluctuate significantly. And if you’re looking to hop on gold’s gains, it may be worth assessing if you’ve missed the boat.  

Can gold keep rising?  

In the past year, the SVS Baker Steel Gold and Precious Metal fund of gold and silver mining stocks, one of the most popular ways investors access the metal, has offered a one-year total return of nearly 200%, as of 26 January. To give some perspective, the MSCI World index has returned 18.4% over the same period.

When assets rise dramatically, they can also fall in the same fashion. Last year’s gains are drool-worthy for investors, but does the asset have more room to grow? Ultimately, only time will tell. But for those looking for a valuation metric, one popular method is to look at the amount of gold that the average American household could afford.  

The logic behind this is that when this group can no longer afford to buy, the price of the asset may be peaking. As of September 2025, the average personal disposable income in the US was $66,983, according to the Federal Reserve Bank of St. Louis. With gold reaching $5,100, this is 7.6% of disposable income per ounce. This time last year, it was around 4%.  

Of course, this isn’t a hard and fast rule, because there are much larger buyers also biting at the gold market. In the past year, China has sold off large portions of its US Treasury holdings and replaced them with gold reserves, which contributed to the price inflation of the asset.  

Can gold protect your assets?  

However, there are other reasons that the gold price might have gone up in the past year, including unease about the market. Last April’s Liberation Day market dip spooked many investors, and the dominance of mega cap tech stocks in many equity indices, as well as unpredictable policies in the US, have many investors on edge.  

Gold has been around for much longer than the markets have been, and perhaps this makes investors feel safe. However, it’s worth challenging this notion at least to some degree.

In the 2008 Global Financial Crisis, gold didn't start to diverge from the fall of equities until 150 days after the initial market drop. Before this, the price was jumping and falling almost by the day. While it did recover faster than the equity market in the end, there’s not been a consistent negative correlation between gold prices and equities. In fact, in five of the 10 worst quarterly global equity market declines of the past 25 years, gold has fallen in price as well, before it has rebounded, according to data from Morningstar.

While it can act as a diversifier, it’s not a very predictable one. If gold continues to behave as it has previously, investors will need to be willing to ride out market bumps.  

How to invest in gold

Thankfully, investing in gold has moved on from purchasing the bullion yourself and creating an ‘x marks the spot’ system for your riches. Instead, there’s a multitude of funds that focus on gold, or gold miners. Investors can also opt to invest directly in a gold miner by purchasing shares in the company.  

If you invest in a gold tracker fund, you are simply following the price of gold, like the $4,600 per ounce that was recently hit. These are called exchange-traded commodities (ETCs). Other fund options will focus more on gold mining companies, where you can choose either an active or passive fund. This will offer different returns from simply investing in gold itself, but the two are usually highly correlated.

Gold coins produced by the Royal Mint as free from capital gains tax, meaning someone who sold them for more than they paid wouldn’t paid any tax on their profits.  

Here are the three most-popular ways AJ Bell DIY Investors are gaining access to gold. Please note that the BlackRock World Mining Trust is not pure gold exposure as it contains a portfolio of mining stocks including some involved in other commodities such as copper.