Gold continues to play a vital role in modern investment portfolios, offering unique benefits that complement traditional assets. For Canadian investors seeking to enhance their investment strategy and portfolio, here are five compelling reasons to consider gold allocation.
A golden age
Gold has long held an almost mythical place for humanity. As far back as the ancient Egyptians, and likely even earlier, the metal has been used as a source of wealth and prestige. The ancient Greeks even had a god who personified gold, Chrysus, and one of the great Greek myths is the story of Midas and his “golden touch”. Today, The largest use for gold is as jewellery, a means to demonstrate one’s wealth and status. Gold, still to this day, is seen as a safe haven in times of uncertainty and instability.
Even global central banks use gold as a reserve asset, providing assurances to other central banks of the solidity of their country’s finances, and also working to underpin the value of their currencies.
For investors, gold as a commodity can provide important hedging opportunities, while investment in gold companies – those businesses that mine, refine and sell the finished product – can provide growth opportunities through their performance as operating companies.
Digging for gold: The case for gold in portolios
1. Portfolio stability through diversification
Gold serves as a unique asset class with historically low correlation to traditional investments like stocks and bonds.1 This characteristic typically helps reduce portfolio volatility, especially during market turbulence.
Key benefits of gold assets include:
- Portfolio risk reduction through asset diversification
- Protection against market volatility
- Enhanced long-term risk-adjusted returns
2. Consistent and long-standing global market demand and usage
Long-term and more recent data consistently shows robust demand for gold across multiple sectors,2 including:
- Jewelry manufacturing: 1,877 metric tons in 2024, representing 37.7% of total global demand
- Industrial applications in electronics and medical devices: grew 7% in 2024
- Central bank reserves: over 1,000 tons purchased in 2024
- Investment demand: 1,180 tons in 2024, up 25% year-over-year
3. A hedge against economic uncertainty
Historical evidence demonstrates gold's effectiveness during periods of economic stress:
- 1970’s inflation surge and stagflation
- Gold rose from $35/oz in 1970 to $850/oz in 19803
- U.S. inflation peak of 14% in 1980
- Inflation-adjusted peak reached approximately $3,300/oz in today's dollars3
- Early 2000’s global market volatility
- Gold increased from $250/oz (2001) to $1,900/oz (2011)
- 2022-2025 inflation surge
- Outpaced average annual U.S. inflation of 2.5%4
- Gold prices have surged recently to record highs (from ~$2,000 to ~$3,500/oz)
- Rally coincided with Federal Reserve policy shifts and worries over global trade wars and inflation concerns5
4. Liquidity and accessibility
Canadian investors can gain exposure to gold in various ways. Plus, they can be exposed to different forms of gold – that being either physical gold, or gold as a financial instrument.6
Physical Gold:
- Bars and coins (minimum 99.5% purity)
- Available through banks and authorized dealers
- Secure storage solutions available
Financial Instruments:
- Exchange-traded funds (ETFs)
- Mining company stocks
- Mutual funds focused on precious metals
5. Tax-efficient investment options
Understanding tax implications for those investing in gold can help optimize returns:7
- No GST/HST on qualifying bullion (≥99.5% purity)
- Capital gains taxed at 50% inclusion rate
- Potential tax advantages through registered accounts
“All that glitters…”: Important considerations for investors
As the old adage suggests, “all that glitters is not gold.” And while investing in gold may make sense for your portfolio, it may not make for your unique needs, goals and risk profile. Here are a few considerations to keep in mind:
Risk factors:
- Price volatility can be significant
- Storage costs for physical gold
- Currency exchange impact on returns
- Mining stocks carry additional company-specific risks
If you are interested in investing in gold and/or gold companies, here are a few investment strategy tips to consider:
- Start with a small allocation (typically 5-10% of portfolio)
- Choose investment vehicles that match your risk tolerance
- Consider long-term holding periods
- Regular portfolio rebalancing
- Understand tax implications before investing
Speak with your RBC Dominion Securities advisor if you want to learn more or if you are interested in adding a little golden “shine” to your portfolio.
Sources
- World Gold Council. (2024). "Gold as a Strategic Asset." Gold Hub Research.
- World Gold Council. (2025). "Gold Demand Trends Full Year 2024." Gold Hub Research.
- Goldman Sachs. (2024). "Historical Gold Price Analysis 1970-2024." Investment Research.
- JP Morgan. (2025). "Commodity Markets Outlook: Gold." Global Research.
- BlackRock. (2025). "Strategic Asset Allocation: The Role of Gold." Investment Institute.
- Royal Canadian Mint. (2024). "Precious Metals Investment Guide." Investment Resources.
- Canada Revenue Agency. (2024). "Tax Guide - Precious Metals Investment." Tax Information.
This information is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under license.