Why Don’t Advisors Add 10% Gold to Client Accounts?
Some may dismiss gold as a low-yield relic. But the numbers tell a different story – one that suggests even a modest 10% allocation could improve client portfolios without sacrificing meaningful return. You get lower volatility, almost guaranteed protection during worst market times, and what do you pay for that? Almost nothing. Gold looks like a no-brainer.
The Sharpe Ratio Advantage
Over both the past five and ten years, replacing 10% of an all-equity SPY portfolio with GLD shaved only 0.2% off annualized returns. The trade-off? Annual volatility dropped by roughly 1.4 percentage points, boosting the portfolio’s Sharpe ratio (measure of risk-adjusted return). Over the last 10 years, a portfolio with 10% gold allocation saw a Sharpe of 83%, compared to about 78% for a 100% equity portfolio. Gold’s low correlation to equities often turns negative during major crises, magnifying diversification benefits exactly when portfolios need it the most.
Returns and Volatility Comparison
Downside Protection That Works
In the past decade’s 20 worst SPY months, a 90% SPY / 10% gold portfolio beat the pure-SPY portfolio in almost all cases. In other words, gold consistently softened equity market shocks – just when clients are most likely to panic and sell. This aspect can keep clients invested through volatility, improving long-term outcomes. Notably, in March 2025 – when the S&P 500 fell 5.6% the 10% gold allocation delivered an excess gain of +1.6%, underscoring its ability to shine in periods of sudden market stress.
S&P vs Gold
Sure, there are some drawbacks, too. Gold doesn’t produce income, and its performance can lag in raging bull markets. Yet history shows that gold has repeatedly preserved purchasing power through times of major upheavals – wars, recessions, inflation spikes, and currency crises. It’s also one of the few assets classes with almost no counter-party risk, highly liquid even under market stress, and trusted by central banks worldwide – which have been accumulating it for over a decade.
Bottom Line: A 10% gold allocation has delivered lower volatility, better risk-adjusted returns, and consistent downside protection in recent history – all for a negligible return trade-off.
Allocating a part of the portfolio to gold isn’t the only way. We take a macro-conscious approach to asset allocation even within equities – adjusting exposure across sectors and styles in the High Quality Portfolio.
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