Allocation calculator

Gold earns a place in a retirement portfolio for one reason, which is that it does not move with the stocks and bonds already in it. The World Gold Council's multi-asset research puts the strategic allocation at 5% to 10% across a range of risk profiles, and it reaches that band by measuring risk-adjusted returns rather than by forecasting the gold price. Harry Browne's Permanent Portfolio has held a fixed 25% since 1981, so the published range runs a good deal wider than most people assume.

The number most retirement savers are actually starting from is zero, because the large target-date funds people are defaulted into hold no direct gold at all. That is the gap this calculator is measuring against, and it is why the first move usually matters more than the exact figure that follows it.

The reason to think in percentages rather than dollars is that the percentage decides how much diversification you are actually buying. Two people moving $100,000 have completely different exposure if one holds $200,000 in total and the other holds two million, and the dollar figure sounds identical in both conversations.

Asset allocation is the decision about what proportion of your money sits in each kind of holding, and it is the decision that explains most of what a portfolio does over time. Picking which particular fund or which particular coin matters far less than deciding how much goes into stocks, how much into bonds and how much into anything that behaves like neither of them.

The reason it works is correlation, which is the tendency of two holdings to move together or apart. A portfolio of ten different technology funds looks diversified on a statement and is not, because all ten fall in the same week for the same reason. Adding a holding that falls on a different schedule is what actually reduces the range of outcomes you have to live through.

That is the job gold is doing in a retirement portfolio, and it is why the sensible way to size it is as a share rather than as a dollar figure. A $50,000 position is a rounding error in a two million dollar portfolio and a third of a $150,000 one, and only the share tells you which situation you are in.

Stocks and bonds are both claims on somebody's future payments, which is why they can fall together when the thing in doubt is whether those payments arrive. 2022 was the clearest recent demonstration, when a 60/40 portfolio lost ground on both legs at once and the bond side gave no shelter at all. Gold is not a claim on anybody, so it is priced by a different set of forces.

The World Gold Council's multi-asset research puts the strategic allocation at 5% to 10% across a range of risk profiles, and the way it reaches that band is worth understanding, because the finding is not a forecast. It is a measurement of what adding gold did to risk-adjusted returns across many portfolios, which is an argument for holding some rather than a prediction about the price.

Two of the most widely published allocations hold more than that. Bridgewater's All Weather portfolio carries 7.5% in gold alongside 7.5% in other commodities, and Harry Browne's Permanent Portfolio has held a fixed 25% since 1981. The large target-date funds most savers are defaulted into hold none, which means the gap between the default and every one of these frameworks is the whole allocation.

There is a cost to the position and it should be named. The dealer markup on IRA-approved metal runs 5% to 8%, and the median administration and storage charges in our database come to about $420 a year, so a sleeve has to earn that back before it starts helping. Those are flat charges, which is why the drag falls as the position grows and why a serious allocation is cheaper to hold per dollar than a token one.

Yes, on the record, though not in every kind of decline. A safe haven is an asset investors move into when they are frightened, and we tested that by running a 60/40 portfolio with and without a metals sleeve through four named US downturns, where the sleeve helped clearly in two of them.

The financial crisis is the strongest case in the whole series. From October 2007 to March 2009 the S&P 500 fell by roughly half on a total-return basis while gold rose, which is precisely the behaviour a hedge is held for and the reason the argument gets made at all. The 2022 inflation shock is the second case, where the sleeve softened a decline that hit stocks and bonds together.

The other two windows are the honest half of the picture. Through the dot-com decline gold mostly sat still across thirty-one months, so a sleeve neither helped nor hurt much. In the first weeks of the covid crash it fell alongside everything else, because a liquidity shock makes investors sell what they can sell rather than what they want to sell, and gold is among the most liquid things anybody owns, which is why it recovered within weeks of that fall.

The pattern across all four is that gold does its heaviest work in a deep, slow drawdown and very little in a fast panic. That is a real property rather than a marketing claim, and it is the reason a metals sleeve is bought before it is needed rather than during the event it is meant to cover.

Since August 1971, when the United States ended dollar convertibility into gold and the metal began trading freely, gold has compounded at about 9.0% a year. Over the same 55 years the S&P 500 with dividends reinvested compounded at about 11.2%, so equities finished ahead over the full window and gold was not far behind an asset class it is not supposed to be competing with.

The last quarter century runs the other way. From the end of 2000 gold compounded at about 11.6% a year against 9.0% for the S&P 500 on the same total-return basis, which covers the dot-com unwind, the financial crisis, a decade of low rates and the 2022 inflation shock. Both figures come from our own month-end series, and both are accurate for the window they name and for no other.

Measured against prices rather than against equities, gold has held real ground for the whole period. An ounce cost $39 in April 1968 and is worth about $4,563 today, which is roughly 4.1% a year above the consumer price index across 58 years. That is the record behind the inflation argument, and it is a stronger record than the one most people expect.

The number that keeps the picture honest is the 1980 top. Gold closed September 1980 at $666.75 and did not close above that again until April 2007, which is more than twenty-six years spent recovering a nominal high and far longer in real terms. Anyone buying into a spike has bought the spike, which is the argument for sizing a position to a share of the portfolio you can hold through rather than to a view about where the price goes next.

It is one division, and the only judgment in it is what counts as a metals position.

The calculator divides the metals position by the total portfolio after the move. It treats the rollover as a reallocation rather than as a contribution, so the total stays the same and only the mix changes, which is what a transfer from an existing retirement account actually does. Existing metals held anywhere are added to the numerator, because exposure to the gold price does not depend on which account holds it.