Gold was on a roll this year — is it right for clients in 2025?

As a financial advisor, I've witnessed numerous investment trends come and go. But gold, the price of which reached all-time highs this year, continues to captivate investors.

The precious mineral has long been seen as a means of diversification and wealth preservation and as a safe haven during times of economic uncertainty. Gold's historical role as an inflation hedge has made it a valuable tool for diversification, especially in the last few years. Additionally, ongoing geopolitical tensions and economic challenges have underscored gold's appeal as a safe-haven asset.

One of the most notable evolutions in gold investment since the financial crisis of 2007-08 is its increased accessibility. The rise of digital platforms has made it easier than ever to purchase and hold physical gold in the form of bars and coins, as well as gold-backed investments like exchange traded funds, while benefiting from institutional custody and sophisticated reporting.

Today's market also offers a more diverse array of gold-linked ETFs compared to 2009, including publicly traded gold mining companies, specific segments of the gold market, as well as gold combined with other precious metals. 

READ MORE: All that glitters: What happens when IRA clients want to hold gold?

Another significant development has been the ability to hold gold within tax-advantaged accounts like IRAs. There are a number of specialized IRA providers that have partnerships with metals dealers, institutional custody and depository capabilities. These partnerships streamline the ability to purchase physical gold within an IRA. 

To buy or not to buy

There are, of course, gold skeptics. Some advisors argue that gold should not be counted as a distinct asset class within clients' overall asset allocation. However, gold has historically had a low correlation to equities, which can help stabilize client portfolios during increased volatility in the equity markets.

Whether gold makes sense for your client's portfolio in 2025 depends on their individual circumstances, goals and risk tolerance. Clients with higher amounts of investable assets are better suited to owning physical gold because they can afford to purchase larger positions. The U.S. Mint offers direct ownership and increased security. Physical gold has transport and storage costs, so it is better suited for long term holding periods.

READ MORE: Are advisors right to be skeptical about gold?

For those clients with smaller initial and ongoing investments, gold-linked ETFs may be a good fit. Additionally, utilizing retirement funds to invest in gold within an IRA can provide clients with tax advantages including tax deferrals. In general, IRAs promote a long-term holding mentality in clients due to withdrawal limitations, and can therefore drive wealth creation. Gold ETFs, by contrast, can be a suitable option for those seeking short-term exposure or more flexibility. 

Golden rules of thumb

Whatever form a gold investment takes, it's crucial that advisors counsel clients against treating it as a get-rich-quick scheme. As we saw in its post-Election Day plunge, gold prices can be volatile. 

Financial planners should also guard against overallocation. A general rule of thumb is to limit gold investments to 5% to 10% of your client's overall portfolio. And, of course, always work with reputable providers when purchasing gold.

Remember, the key to successful wealth management isn't about chasing the next hot trend, but instead helping your clients achieve a diversified portfolio that can weather various economic conditions. Gold, when used judiciously, can be a valuable tool in accomplishing that goal.