How to Allocate to Physical Gold and Gold ETFs as Market Turmoil Grows
Gold's popularity is seeing a spike as the S%P 500 wanes. Here's how I allocate my precious metals portfolio.
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As of Monday morning, front month spot gold futures (measured in continuous contract form) are up more than 19% year to date, while front month silver futures measured the same way are up about 18.7%. As of Friday night's close, the S&P 500 and Nasdaq Composite stood down 5.1% and 10.3%, respectively. Bear market for equities? Another run at a significant correction to say the least.
Don't have a futures trading account, or the ability to take possession of physical gold or silver? It's not exactly the same thing from an Armageddon-like perspective, but those with the ability to trade equities can go the exchange-traded fund (ETF) route. As of Friday evening, the SPDR Gold Shares GLD was up 17.3% in 2025, while the iShares Silver Trust SLV was up even more, 17.7%.
Tough times? Equities struggle in a tough economy. So does real estate if fiscal policy and monetary policy decide not to sacrifice the financial welfare of our children and grandchildren and not steal from the future growth to satisfy the need to avoid short-term discomfort.
Gold, though, is different. So, is silver to a lesser degree, and so might be Bitcoin, but that is arguable due to the lack of a track record and due to its uncertainty as a store of value.
Keep in Mind for Gold
Gold had been money for roughly 5,000 years. What are the characteristics of money? Simply put, money must be divisible, must be used as a unit of account, must be used as a medium of trade and must be used as a store of value. Gold and silver are both divisible and both used as a store of value. Both have been used as media of trade and as units of account, though neither really is at this place in history.
The precious metals have been replaced by fiat currency for those purposes, though an argument can be made that fiat currency makes for a poor store of value. Does that mean that fiat currency itself is not money? Judy Shelton was nominated to the Federal Reserve Board of Governors by President Trump during his first term but not confirmed by the Senate due to her views on how to stabilize the currency.
Shelton has some interesting views on backing, if not the currency, then at least a portion of U.S. sovereign debt with gold or some other hard asset. In my view, her ideas would remove at least partially the adjective "fiat" from the U.S. dollar and make the greenback far more desirable to hold than would be the planet's other reserve currencies. For those with an interest in such thing's, Shelton lays out her ideas in her 2024 book, "Good as Gold: How to Unleash the Power of Sound Money."
Bitcoin, because some readers were sure to ask and it certainly deserves a spot in this conversation, is divisible, could be used a unit of account, but never really has been, could be used as a medium of trade, but never really has been, as so far in its short history, it has made for a volatile store of value.
Other Reasons for Gold's Popularity
Central banks have been huge net buyers of physical gold. One obvious example of this is the buying done by the People's Bank of China and the Central Bank of the Russian Federation. As the BRICS nations have often hinted at, creating a monetary union with a single currency that could either exist alongside their fiats or replace them along the lines of the euro.
As the EU nations participating in the single currency zone have had to surrender their monetary sovereignty, that's something I really do not see China, Russia, India or Brazil being willing to do. That said, something like the International Monetary Fund's (IMF) Special Drawing Rights (SDR) backed by a hard asset such as gold would put the U.S. dollar on the back foot in a hurry and could become the preferred unit of trade for global commodities.
As a "safe haven" asset, gold and, to a lesser degree, silver, are sought after during times such as these, when investors get defensive. Bitcoin is seen as a "risk asset" and does not fit this bill. Bitcoin also disappears if the electrical grid is taken down in either a cyber or kinetic attack, where physical assets do not.
One More Thing...
How deeply negative the Q1 GDPNow (-2.8% quarter over quarter, SAAR) estimate out of Atlanta is truly concerning. A lot of that has to do with the export and import of physical gold. Adjusted for the cross-border gold trade, Atlanta's model becomes -0.5%. That's still in contractionary territory, but nowhere near as awful as -2.8%. Why have imports of gold spiked as they have this quarter, enough to significantly impact a serious GDP model?
Unabated Demand
Readers will see that the GLD ETF is now breaking out of a regression model that goes back to the most recent low point for this fund in 2022. Shares of this fund are up 90.6% over that time frame in what has been a slow (at times), but steady crawl.
This is that same time frame for gold front month futures presented as a continuous contract. Neither one has even tested its 200-day SMA from above since late 2023.
What to Do?
I have always been considered something of a minor-league gold bug. That means that I'm not over the top about it, but I would not dream of having no gold among my investable assets. That to me would be sort of like traversing a desert environment with no water in storage just in case supplies run low.
Here's my plan for precious metals, but primarily gold for the new kids or for those who would like a refresher. I like to maintain an allocation of 5% to 10% of my investable assets tied up in gold. The first 5% is devoted to physical gold and is adjusted anywhere from quarterly to annually. The next 0% to 5%, is tradeable and kept in the form of "paper gold" which is either in ETFs or futures (or a mix of both) and is adjusted according to the ebb and flow of the marketplace.
At the time of publication, Guilfoyle was long physical gold, physical silver, GLD and SLV.
