Gold has surged over five years. Is it still worth holding?

Gold does not usually generate the same excitement as artificial intelligence stocks, high-growth technology names or the latest market darling.

It produces no income. It has no earnings growth. It does not buy back stock. It doesn’t surprise the market with a new product launch.

Yet over the five years to 17 June 2026, gold has delivered a return of 145.4% (19.7% p.a.), in US-dollar terms, or 159% (21% p.a.), in Australian-dollar terms. The Nasdaq-100, which has been one of the best performing equity indexes in the world in recent years, has a total return of 119.2% (17% p.a.) in USD terms, or 131.9% (18.3% p.a.) in AUD terms.  

That performance raises a simple question for investors: after such a strong run, does gold still deserve a place in portfolios?

The answer may depend less on whether investors expect another year of outsized gains and more on what they want gold to do. For some, it is a diversifier. For others, it is a hedge against uncertainty. For others still, the recent rally may be a reason to rebalance and take profits.

What has driven gold higher?

Gold sits in an unusual position. It is both a consumer good and an investment asset, with demand coming from jewellery, technology, industry, central banks, exchange-traded funds and private investors.

Its price can be influenced by a wide range of factors, including interest rates, inflation expectations, the US dollar, geopolitical risk, central bank buying and investor flows.

According to the World Gold Council, the strength in gold in 2025 and the early months of 2026 was supported by several factors, including:

• Central bank buying – central banks accumulated an average of 1,000t of gold per annum over the last four years, roughly twice the average of the proceeding decade. 
• Investor demand, including flows into gold ETFs – ETFs had US$89bn in net inflows in 2025, and US$19bn in the first four months of 2026. 
• Diversification away from the US dollar
• Geopolitical uncertainty and concerns about inflation.

Central bank buying has been one of the more important structural supports for the gold market. Many central banks have increased gold holdings in recent years as part of broader reserve diversification strategies.

That does not mean the price moves in a straight line. Gold is often described as a safe-haven asset, but its behaviour during periods of market stress can be more complicated than the textbook version suggests.

The recent conflict involving Iran is a useful example. In theory, geopolitical tension and oil supply risks might be expected to support gold. In practice, the market reaction was more mixed. Inflation fears, higher oil prices, changing expectations for interest rates, the US dollar, equity-market strength and investor risk appetite all appeared to matter.

That is an important reminder: gold may be a safe-haven asset, but it does not respond to every crisis in the same way.

Can gold continue to climb?

After a strong rally – and despite weakness in the last few months – investors should be cautious about extrapolating recent returns.

Several major forecasters still see support for gold, but the outlook is not simply a story of repeating the gains of the past few years.

Johan Palmberg, Senior Quantitative Analyst at the World Gold Council, noted in April that the near-term triggers for investors to shift tactically into gold appeared limited, despite geopolitical tension. However, he also highlighted longer-term supports including central bank buying, diversification away from the US dollar, elevated debt levels and inflation pressures in some countries.

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Gold in a tug of war between short-term pressure and longer-term structural support

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Investment bank forecasts also point to continued interest in gold, though with different assumptions and price targets.

Morgan Stanley cut its gold price targets at the start of May, but still anticipates about 9% growth from the end of April to US$5,200 per ounce later this year off the back of central bank and ETF buying, along with anticipated US Federal Reserve rate cuts.

The institutional bank noted that gold can be sensitive to monetary policy which has offset its safe-haven protections and hedge against inflation in this environment. The oil shock from the crisis in Iran and supply chain disruptions push interest rate expectations and in turn, affect gold prices.

JP Morgan maintained a base case target for gold prices of US$6,000 per ounce by the end of 2026, viewing weakness in the start of 2026 as temporary and expecting accelerated buying patterns in the second half of 2026. It did lower its full-year average forecast to reflect the weakness in the first half of 2026.

Goldman Sachs raised its target in January to US$5,400 a troy ounce and maintained this estimate in May, highlighting continued structural support for gold prices from central bank purchases. It tips an average of 60t per month in central bank purchases.

Yardeni Research lowered its price targets from US$6,000 to US$5,000 for the end of 2026, but maintained a target of $10,000 for the end of 2029.

Taken together, these forecasts suggest many major institutions still see structural support for gold. However, investors should treat price targets carefully. Forecasts can change quickly when assumptions around rates, inflation, the US dollar or geopolitical risk shift.

What role can gold play in a portfolio?

Many investors and fund managers use gold for three main reasons.

First, gold can provide diversification. It has often behaved differently from equities and bonds, which may help reduce portfolio volatility in some market environments.

Second, gold is often viewed as a long-term store of value. This does not mean it protects purchasing power in every period, or that it reliably tracks inflation over short timeframes. Its inflation-hedge characteristics depend heavily on the period being measured and the broader market environment. It’s worth noting that in the shorter term, it doesn’t always act in this way, according to some research.

Third, gold is commonly seen as a safe-haven asset. During periods of financial stress or geopolitical uncertainty, investors may move toward gold because it is not tied to the earnings of a company or the creditworthiness of a government issuer.

There is research suggesting that gold can improve risk-adjusted returns in diversified portfolios. For example, Wagner and Poppe’s 2024 analysis of data from 1973 to 2023 found that a gold allocation improved portfolio outcomes within their model, with a 17% gold allocation producing the strongest risk-adjusted result. As with any portfolio modelling, the result depends on the assumptions used, the assets included and the period studied.

Investors also need to remember what gold does not do.

It does not pay dividends. It does not produce interest. Returns depend primarily on price appreciation, which means investors need someone else to pay more for it later.

Gold can also underperform for long periods. After previous rallies, it has experienced large drawdowns and taken years to regain old highs. That makes position sizing important.

For investors who already hold gold, a strong rally may be a reason to review allocations. That does not necessarily mean selling out, but it may mean asking whether the position has become too large relative to the role it is meant to play.

How can investors gain gold exposure?

Investors looking to factor gold in their portfolios can look at a few options – both direct and indirect.

The most direct approach is physical bullion, purchased through a registered dealer. This gives investors direct ownership, but it also introduces practical issues such as storage, insurance, transaction costs and spreads. 

Some bullions dealers, like ABC Bullion and Perth Mint, allow investors to purchase gold that is held in either allocated or unallocated pools in their vaults, which goes some way to solving some of those issues. 

Some investors may prefer to use a gold ETF, which aims to track the gold price. ASX-listed examples include:

1. Global X Physical Gold (ASX: GOLD)
2. VanEck Gold Bullion ETF (ASX: NUGG)
3. iShares Physical Gold (ASX: GLDN)
4. Perth Mint Gold (ASX: PMGOLD) 
5. Betashares Gold Bullion Currency Hedged ETF (ASX: QAU)

Investors should check the structure, fees, currency exposure and liquidity of each product before investing.

Another option is gold miners. These can offer leveraged exposure to the gold price, because rising gold prices can increase margins for producers. However, miners are not the same as bullion. They are equities, and they carry equity-market risk as well as company-specific risks.

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These risks can include production costs, reserve quality, project execution, exploration outcomes, balance sheet strength, jurisdictional issues and management decisions.

Larger ASX-listed gold miners include:

• Newmont Corporation (ASX: NEM)
• Northern Star Resources (ASX: NST) 
• Evolution Mining (ASX: EVN)
• Greatland Resources (ASX: GGP)

Managed funds and ETFs can provide more diversified exposure to gold miners. Examples include:

• VanEck Gold Miners ETF (ASX: GDX)
• Betashares Global Gold Miners ETF – Currency Hedged (ASX: MNRS)
• L1 Capital Gold Fund (ASX: LGF) 
• Lion Selection Group (ASX: LSX)*

Investors should note that gold miner ETFs can have very different exposures, including differences in geography, company size, currency hedging and index methodology.

*Note: Lion Selection Group does not exclusively invest in gold mining companies, but as at 30 April 2026, nine of 11 companies in its Australian portfolio held some precious metals exposure. 

The bottom line

Gold has already had a powerful run, and investors should be wary of assuming the next five years will look like the last five.

There are still reasons investors may consider gold exposure. Central bank buying, diversification away from the US dollar, persistent inflation risks and geopolitical uncertainty may continue to support demand.

Despite the strong rally however, gold can play a role as a diversifier. But it can be volatile, produces no income and can underperform for extended periods.

For investors considering adding gold to their portfolios, they should ensure the size and type of exposure matches the role gold is meant to play in the portfolio.