Gold Is Not a Growth Asset
Gold does not pay dividends. It has no earnings, no cash flow and no "intrinsic yield" the way a bond does. Its long-run value is driven by scarcity, sentiment and fear, not by compounding.
That is fine — as long as you buy it for the right job. The job in a diversified portfolio is crisis correlation: when equities sell off and real yields collapse, gold has often moved differently from shares. That has made it a shock absorber in the same slot where high-quality government bonds sometimes sit.
It is not a replacement for equities or bonds; it is a sleeve that behaves differently from both.
GLD: The Easy Liquid Alternative
GLD is the SPDR Gold Shares ETF — arguably the most liquid gold vehicle on US markets. You buy it through a normal brokerage account, it follows the price of physical gold, and you avoid the storage, insurance and purity concerns of holding bullion yourself.
It is worth knowing the basics:
- Gold ETFs are usually backed by physical metal held by a custodian, with the units representing a claim on that metal.
- GLD's expense ratio has historically been around 0.40% — higher than most broad equity ETFs because storing and insuring physical metal is genuinely expensive. Check the current factsheet for the live figure.
- The price moves with the USD gold price. A Singapore investor still owns USD exposure inside the position, separate from the gold exposure.
What Gold Will Not Do
The hardest part of holding gold is tolerating long stretches of underperformance. Gold can sit flat or fall for years while equities rise, then spike violently during a crisis. Buyers who cannot tolerate that will sell at the worst time — exactly when the insurance is supposed to pay out.
Gold also does not earn the way you may be used to:
- No dividends or interest to reinvest.
- No corporate growth underneath it.
- Capital gains may attract tax treatment depending on the jurisdiction and your holding structure; the same fact-checking you apply to equities applies to gold.
The Allocation Question
There is no single "correct" gold weight. Common practice ranges from a single digit percentage of the portfolio up to a small double-digit percentage at the aggressive end — but the assignment, not a universal number, is what matters.
Typical rationales for a gold allocation include:
- A hedge against real-yield surprises.
- A diversifier that can behave differently from equities and long bonds at once — the two assets most people already own.
- A store of value that does not depend on any company or government promise.
Typical reasons to stop are just as real:
- The same money could be in a globally diversified equity ETF that grows over time.
- Gold pays you nothing while you wait.
- A large allocation does not protect a small equity allocation from doing badly.
The Takeaway
Keep gold's label honest: it is a crisis sleeve, not a growth sleeve. If you already own a broad world equity ETF and want an asset that can behave differently under stress, a small, deliberate gold allocation through a liquid vehicle like GLD can be a defensible part of the mix. If you buy it hoping for capital gains, you have bought the wrong asset for the wrong reason.
General education, not financial advice. Check current fund documents and tax rules before investing; the figures above were current at the time of writing and can change.