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Gold is back in the spotlight.

As geopolitical tensions intensify in the Middle East following coordinated military strikes involving the U.S., Israel and Iran, investors have rushed toward traditional safe-haven assets. The result: a sharp rally in gold prices that has once again sparked debate about whether the precious metal belongs in your portfolio.

But while gold often shines during crises, financial professionals caution that investors should move carefully, understand the mechanics of gold investing, and keep allocations disciplined.

Why gold is rallying again

Gold prices climbed sharply after the latest escalation in the Middle East, briefly surging above $5,400 per troy ounce before settling closer to $5,300. That puts the metal within striking distance of its January record high of $5,594.

The rally reflects a familiar pattern. When geopolitical risk rises, investors often shift capital away from equities and toward assets perceived as stores of value. Gold has historically served that role during wars, currency instability, inflation spikes and financial crises.

So far this year, gold is up roughly 23%. In 2025, it surged about 64%, dramatically outperforming many traditional assets. By comparison, the S&P 500 gained 16.4% last year. The metal’s momentum has been fueled not only by geopolitical tension but also by strong central bank buying, persistent inflation concerns and a weaker U.S. dollar.

Central banks have been particularly aggressive buyers. According to World Gold Council data, global central bank purchases exceeded 1,000 metric tons in consecutive years recently — well above historical averages — as countries diversify reserves away from the dollar.

Analysts at J.P. Morgan remain bullish. In a recent research note, the bank projected gold could climb to $6,300 per ounce by the end of 2026, citing ongoing geopolitical instability and structural demand from sovereign institutions. However, they also noted that short-term conflict-driven spikes often fade once tensions stabilize.

Gold’s reputation as a safe haven — with caveats

Gold is often described as a hedge against uncertainty. It has a long track record as a store of value, especially during periods of high inflation or market stress. During the 2008 financial crisis and the early months of the pandemic in 2020, gold prices rose as equities sold off.

But gold is not a guaranteed winner.

Historically, the metal has experienced extended flat periods. Between 2011 and 2015, for example, gold declined nearly 45% from peak to trough. It also produces no income — no dividends or interest — which means its return depends entirely on price appreciation.

Volatility can be significant. In some years, gold has moved 20% to 30% in either direction. Investors who enter during spikes driven by fear sometimes face pullbacks once markets stabilize.

For that reason, many financial advisors recommend treating gold as a portfolio diversifier rather than a core holding.

How much gold should you own?

Most wealth managers suggest keeping alternative assets — including gold — to between 5% and 10% of a diversified portfolio. The exact allocation depends on your risk tolerance, time horizon and overall asset mix.

Gold’s primary role is diversification. It often behaves differently than stocks and bonds, which can help smooth portfolio volatility during downturns. However, over long periods, equities have historically delivered higher returns than gold due to corporate earnings growth and reinvested dividends.

Investors who overweight gold may sacrifice long-term growth potential.

Different ways to invest in gold

There are multiple ways to gain exposure, and each carries distinct risks and tax implications.

Physical gold — such as coins or bullion — requires secure storage and insurance. Transaction spreads can also be wider than financial securities.

Many investors instead use exchange-traded funds.

One of the largest physically backed ETFs is SPDR Gold Shares. Each share represents fractional ownership of physical gold stored in vaults. These ETFs trade throughout the day like stocks and provide liquidity without storage concerns.

However, tax treatment is different from stocks. The IRS classifies physical gold and gold-backed ETFs as collectibles. Long-term gains are taxed at a maximum federal rate of 28%, rather than the standard long-term capital gains rates of 0%, 15% or 20%. Short-term gains are taxed at ordinary income rates, which range from 10% to 37%.

Another approach is futures-based ETFs, such as Invesco DB Gold Fund. These funds invest in gold futures contracts rather than physical metal. Gains typically follow the IRS 60/40 rule: 60% of profits are taxed at long-term capital gains rates and 40% at ordinary income rates, regardless of how long the investment is held.

Investors can also gain indirect exposure through mining stocks or ETFs like VanEck Gold Miners ETF, which holds shares of gold-producing companies. These investments behave more like equities and are taxed under standard short- and long-term capital gains rules. However, mining stocks carry company-specific risks, operational costs and broader stock market exposure.

Key risks investors should weigh

Before buying gold during a geopolitical surge, consider several factors:

Price momentum can reverse quickly once tensions ease.
Rising interest rates typically pressure gold, since higher bond yields increase the opportunity cost of holding a non-yielding asset.
A strengthening U.S. dollar often weighs on gold prices globally.
Tax treatment can significantly affect after-tax returns in taxable accounts.

Additionally, buying after a sharp run-up increases the risk of short-term pullbacks.

The bottom line

Gold’s recent surge reflects genuine geopolitical risk and strong structural demand. Forecasts from major institutions suggest further upside could be possible if global instability persists.

However, gold is best viewed as a strategic diversifier, not a speculation vehicle or all-weather solution. A modest allocation — integrated into a broader mix of equities, fixed income and other assets — is typically the most disciplined approach.

In uncertain markets, balance tends to outperform panic.