Precious metals: gold and silver

Precious metals like gold and silver are physical commodities long used as a store of value. Investors hold them mainly for diversification and protection, not income.

Why people hold gold

• Inflation and currency hedge: gold has often held its value when currencies weaken. See inflation.
• Crisis insurance: it can rise when shares fall, cushioning a portfolio.
• No default risk: it isn't anyone's promise to pay.

The drawbacks

• No income: unlike shares or bonds, gold pays no dividend or interest — its only return is price change.
• Volatile and unpredictable: it can go many years without gaining.
• Storage and costs for physical metal.

Ways to own it

• Physical — coins and bars (secure storage needed).
• ETFs / funds backed by physical metal — convenient and liquid.
• Digital gold and, in some countries, government gold bonds that also pay interest.

How much

Many advisers suggest keeping metals a small slice (often cited around 5–10%) of a diversified portfolio — enough to diversify, not so much that the lack of income drags on long-term growth.

Key takeaway

Gold is portfolio insurance and a diversifier, not a wealth-building engine. A modest allocation can smooth the ride; a large one usually costs long-term return.