The price of gold seems to be hitting new all-time highs every week.
Gold investors are sitting pretty, with gold prices rising over 35% over the last 12 months alone, and now trading at over $3,300 per ounce.
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But whether you own gold already, or are wondering if now is a good time to invest, there are a few things you should do when the price of gold skyrockets.
If you’ve got gold in your portfolio (or even gold ETFs), it’s a good idea to take a look at your investment balances when gold jumps in price. For most investors, gold is a small part of their overall portfolio, and gold jumping in price can boost portfolio returns compared to other assets.
Over the last 20 years, gold prices have outperformed the S&P 500, according to Curvo. If you don’t have any gold in your portfolio, you might be thinking of adding some. With gold at all-time highs, you might be hesitant to add gold right now — and you might be right. Zooming out further, gold prices have a history of dropping when markets are doing well and political tensions calm down.
It can be worth potentially adding gold over time by dollar-cost averaging into gold or gold ETFs. This lets you purchase while gold prices are high, and scoop up more gold if prices drop as well.
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If you hold any gold in your portfolio, it might be a good idea to rebalance your portfolio to see why gold jumps significantly in price. Ideally, you’ll have a chosen asset allocation for your portfolio, including defining what percentage of your portfolio is allocated toward gold.
For example, if you have a $100,000 investment portfolio and want to allocate 10% of your portfolio toward gold, that means you should have about $10,000 worth of gold in your investment accounts. But with the price of gold increasing, you might end up with $15,000 worth of gold, meaning your portfolio is now 15% gold.
The process of rebalancing your portfolio involves selling investments that you hold too much of (overweight assets), and buying investments that you hold too little of (underweight assets). So if you now hold too much gold in your portfolio compared to your chosen asset allocation, you’d sell some gold to buy something you hold too little of.
For example, if you now hold $15,000 in gold (15%), you’d sell $5,000 worth of gold and use the proceeds to purchase other investments (such as stocks and bonds). This brings your gold asset allocation back to 10% of your portfolio, and brings the asset allocation of other assets back in line with your preferences.