Investors have been urged to pause before chasing gold assets or ETFs as risks and volatility remain elevated.
As gold prices push to new highs, investment experts are urging caution against rushing into the precious metal, warning that recent performance alone does not make it a reliable defensive asset.
The price of gold currently stands at approximately US$4,923 as of 23 January 2026, up from around US$2,700-$2,800 (an increase of around 75 per cent) a year ago.
InvestSMART chief executive Ron Hodge said investors feeling the urge to pile into gold ETFs should pause and reassess how the asset fits within their broader portfolio.
“I’d caution investors feeling the urge to pile into gold right now to pause and revisit their long-term strategy,” Hodge said.
“Chasing performance is where investors often get caught out. Gold has risen sharply over the past year, but that alone doesn’t mean prices will continue to rise.”
Hodge said the more important question for investors was not how much gold to buy, but whether it aligns with their overall portfolio construction, risk tolerance and investment time horizon.
“Gold doesn’t generate income, and its long-term returns are far less predictable than a diversified portfolio of shares, bonds and cash,” he said. “That means the idea of gold as a purely defensive play can be misleading.”
He warned that, like equities, gold prices can fall sharply from elevated levels and should not be viewed as defensive in the same way as cash or high-quality bonds, which are designed to preserve capital and provide income.
“History shows gold can experience sharp corrections,” Hodge said. “It has gone through multiple periods of significant drawdowns over the past several decades, including falls over 50 per cent following peaks in the 1980s and circa 30 per cent after 2011 after monetary policy shifts.”
He pointed to more recent volatility as a reminder that gold’s price path can be uneven.
“Most recently, in October 2025 gold experienced a sharp one-day decline of more than 5 per cent, highlighting that significant declines can occur even in rising markets,” he said.
For most investors, Hodge said gold was best viewed as a portfolio diversifier rather than a substitute for a well-diversified mix of growth and defensive assets.
“It may help smooth volatility at times, but it shouldn’t replace assets that support long-term growth or regular cash flow,” he said, adding that this consideration was particularly important for retirees who rely on income.
“At InvestSMART, we encourage investors to start with a diversified portfolio built around Australian shares, global shares and bonds,” Hodge said. “When that mix is right, allocating a small portion to thematic exposures you have a view on, including gold, can be reasonable.”
He said that for investors who do want exposure, physical gold ETFs that track the price of gold directly offered a simpler option than investing in mining companies.
Hodge’s concerns were echoed by T. Rowe Price multi-asset portfolio manager Matt Bance who said the upward move is “not a signal to chase performance”.
“We view recent price action not as a signal to chase performance, but as confirmation that the macro conditions under which gold has historically added value—policy uncertainty, institutional strain, and geopolitical risk—remain in place,” he said.
T. Rowe Price did favour gold, however, but is maintaining an underweight stance on duration as it believes gold should help cushion equity drawdowns during periods of economic weakness.
The cautionary tone comes as gold continues to attract strong investor flows with Global X ETFs Australia reporting a sharp rise in demand for its suite of gold ETFs.
The Global X gold range — including the Physical Gold Structured ETF (GOLD), Gold Bullion ETF (GXLD) and Gold Bullion (Currency Hedged) ETF (GHLD) — saw $785 million of inflows over the year to 31 December 2025 and now holds $7.3 billion in assets under management.
Since 1 January, Australians have invested an average of $19.8 million a week into the funds, up 28.6 per cent from the $15.4 million in average weekly flows recorded across 2025, highlighting the strength of investor appetite despite warnings against chasing recent gains.
