A common misunderstanding about gold is treating it like a growth investment that should outperform stocks over time. Historically, gold hasn’t worked that way – it doesn’t generate earnings, pay a dividend, or compound the way a business or bond coupon does. Its return comes entirely from price change.

What gold has more consistently shown is low correlation with stocks and bonds – it doesn’t reliably move in the same direction as the rest of a typical portfolio, which is the actual case for holding some. That’s a diversification argument, not a growth argument.

The other common mistake is over-concentration: because gold is often marketed as ‘safe,’ some investors put an outsized share of savings into it. Most guidance on precious metals allocation points to a modest slice of a portfolio (commonly cited in the 5-15% range) rather than a majority position, specifically so the diversification benefit isn’t undone by concentration risk.