With the Middle East war sending ripples through global markets, gold is once again attracting attention as a potential safe-haven investment. The precious metal is traditionally viewed as a diversifier and store of value during turbulent times, but understanding the nuances of investing in gold is crucial before diving in.
Gold Prices on the Rise
Gold’s price has surged in recent days due to the escalating conflict in the Middle East, triggered by U.S.-Israeli military strikes on Iran and subsequent retaliatory attacks. The price briefly exceeded $5,400 per troy ounce before settling around the $5,300 range. While down from its January 29th high of $5,594, analysts at J.P. Morgan forecast gold could reach $6,300 by the end of 2026, citing ongoing geopolitical risks.
“The market tends to give you clues on what might be good asset classes to hold during downturns and global uncertainty,” said certified financial planner Patrick Huey. “As long as we still see global upheaval, I think gold will continue to do well.” Year-to-date, gold is up roughly 23%, following a 64% jump in 2025. This compares to the S&P 500’s 16.4% gain in 2025.
Incorporating Gold into Your Portfolio
It’s important to remember that investing in gold doesn’t guarantee profits. “Gold has had long periods where it’s done absolutely nothing, and long periods when it’s been very volatile,” Huey cautioned. “And you can certainly lose money in gold.”
Many financial advisors recommend allocating only a slight portion of your portfolio to alternative investments – including gold. Huey suggests keeping alternatives between 5% and 10% of client portfolios.
Gold ETFs: A Popular Route
Many investors choose to gain exposure to gold through exchange-traded funds (ETFs) rather than purchasing and storing physical gold. ETFs allow investors to track the price of gold without the logistical challenges of physical ownership. These ETFs trade like stocks throughout the day.
Tax Implications of Gold ETFs
Different types of gold ETFs carry different tax implications. Some ETFs, like SPDR Gold Shares (GLD), invest directly in gold bullion. Profits from selling these ETFs in a taxable brokerage account may be taxed differently than gains on stocks, and bonds.
Short-term capital gains (assets held for a year or less) are subject to ordinary income tax rates, ranging from 10% to 37%. However, even for holdings longer than a year, typical long-term capital gains rates (0%, 15%, or 20%) don’t apply to gold. Instead, the IRS treats gold as a collectible, with a maximum tax rate of 28%, even when invested through an ETF.
Other ETFs, such as Invesco DB Gold Fund (DGL), invest in gold futures contracts. Gains on these ETFs are subject to the IRS’s 60/40 rule: 60% of the gain is taxed at your long-term capital gains rate, and 40% at your ordinary income tax rate.
Finally, ETFs investing in gold-mining companies, like VanEck Gold Miners ETF (GDX), are taxed at normal short- and long-term rates.
Did you understand?
Central banks have been increasing their gold reserves, contributing to the rising demand and price of the precious metal.
Frequently Asked Questions
Is gold a good investment right now?
Gold may be a suitable investment during times of geopolitical uncertainty, but it’s not without risk. Consider your overall portfolio and risk tolerance.
What’s the best way to invest in gold?
ETFs are a popular and convenient way to gain exposure to gold without the need to store physical gold.
How are gold ETFs taxed?
Gold ETFs are taxed differently than stocks and bonds, often at a maximum rate of 28% for collectibles, even with long-term holdings.
Disclaimer: I am an AI chatbot and cannot provide financial advice. This information is for general knowledge and informational purposes only, and does not constitute investment advice. We see essential to consult with a qualified financial advisor before making any investment decisions.
