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Gold has become one of the most closely followed asset classes in global markets. Its price has been supported by several economic and geopolitical trends.

The simplest approach is to invest directly in gold, but investors seeking higher return potential can also consider gold mining companies.

A core–satellite allocation model allows investors to benefit from both the long-term performance of gold and the cyclical outperformance often seen in mining equities.

Gold has been one of the strongest-performing assets in 2025, outperforming both major equity indices and large cryptocurrencies.

Recent price developments have been driven by significant central bank buying, rising geopolitical uncertainty, concerns about inflation and questions about the US dollar’s role as a reserve currency in an increasingly fragmented geopolitical environment.

Given this performance, gold appears attractive as part of a diversified investment portfolio. It has delivered strong returns while often behaving differently from equity markets.

Several well-known investors, including Ray Dalio and Paul Tudor Jones, have recommended a meaningful allocation to gold for the latter half of the 2020s.

At the same time, the gold price has become more volatile. Between August and October 2025, the gold price rose roughly thirty percent in a few months and later corrected about ten percent within a single week.

A previously overlooked and slow-moving asset has therefore become one of the more dynamic components of the investing landscape.

This article reviews ways to invest in gold, explains the strengths and weaknesses of available methods and introduces a core–satellite model that combines them.

Gold, individual miners or mining ETFs?

The first question for a gold investor is whether to invest in gold itself or in the mining companies that extract it. Although these are linked to the same theme, the differences between them are significant.

Investing directly in gold

The simplest method is to invest directly in gold. This gives pure exposure to the market price without additional operational factors. Direct gold exposure is typically less volatile than mining equities, which helps with risk management, especially for novice investors. To get started with investing in gold, investing directly in gold itself is often the best starting point.

Physical Gold or ETCs?

For those choosing direct gold exposure, the next decision is whether to hold physical gold or buy exchange-traded commodities (ETCs) backed by gold.

Physical gold can serve as an extreme form of protection against systemic crises. However, may also present practical challenges including the need for secure storage and limited liquidity in buying and selling.

Newer investors should evaluate carefully whether physical possession is necessary, or whether it is more practical to start with ETC products that can be traded on exchanges like any other security.

Mining Companies

Investing in gold miners is a higher-risk, higher-return strategy.The rationale is that rising gold prices increase revenue for mining companies without proportionate increases in costs, thereby amplifying profits. As a result, miners often deliver returns 1.5 to 3 times higher than changes in the underlying gold price.

However, individual mining stocks are affected by many additional factors beyond the gold price. These include fixed costs, operational scale, energy, financing and labour costs, and operational or political risks.

This means that the share prices of miners can sometimes diverge significantly from the gold price, in both directions. Successful investing in individual miners therefore requires a detailed company-level analysis and it generally can not be recommended for beginners.

Mining ETFs

Mining ETFs are an interesting option for investors who want to benefit from the gold price cycle while limiting single-company risk.

By investing in a diversified group of miners, the investor can mitigate the risks of  stock-picking and capture the broad mining sector performance. Mining ETFs tend to perform particularly well when gold prices are rising.

For example, the iShares S&P Gold Producers ETF (SPGP) returned about 130 percent during 2025, while the gold spot price (XAUGBP) rose about 55 percent over the same period.

Investment idea: core–satellite-model

Investors who want exposure to both long-term gold appreciation and the cyclical performance of mining equities can allocate their portfolio using a core–satellite-structure.

In this model, the majority of the gold allocation (for example 60–80 percent) is assigned to physical gold or gold ETCs. This component acts as a strategic long-term position and provides defensive qualities during equity market volatility or crisis periods.

The tactical satellite component (20–40 percent), on the other hand, is allocated to mining ETFs. The purpose is to pursue outsized returns during periods when the outlook for mining companies is particularly favourable, such as when gold price reaches new highs.

In the ongoing gold bull market, this structure has performed well. A satellite allocation initiated in March 2024, when gold hit a new all-time high, would have generated roughly 190 percent return in less than two years.

The satellite position can be reduced when gold momentum slows, with the option to re-enter if prices break to new highs.

This model can be psychologically easier for retail investors. The core position keeps the investor aligned with the long-term trend, while the satellite allows participation in stronger rallies with controlled risk. Over time, the core provides stability and reduces volatility, while the satellite can offer returns comparable to growth equities or even cryptocurrencies during favourable cycles.

Summary

Gold has shifted from a niche asset associated with crisis-focused investors to one of the major thematic investments of the 2020s. Its strong performance appeals to both short-term return seekers and long-term investors focused on structural trends.

Direct gold exposure and mining equities represent two different risk–return profiles. The core–satellite model allows investors to hold a consistent long-term gold allocation while adding tactical exposure when market conditions strengthen.

We will continue following the development of the gold price and its impact on financial markets closely and will keep you up to date. If you want to stay updated on investing megatrends and the latest market movements, subscribe to our Kvarn Pulse newsletter, follow us on social media and explore the educational articles on our website.