Gold Is a Hot Topic — but a Classic Warren Buffet Rule Suggests Caution

Gold prices have soared over the past year. However, investors need to be cautious, experts say. One advisor recalls Warren Buffett’s rule: “Be fearful when others are greedy, and be greedy when others are fearful.” Gold should occupy only a small portion, perhaps 1% or 2%, or even less, of a well-diversified portfolio, experts advise. Gold prices are rising, but investors must resist the temptation to chase “shiny objects,” say investment experts. The SPDR Gold Shares (GLD) fund, which tracks the price of gold, has risen about 11% in 2025 as of 2:00 PM ET on Tuesday. Its yield has surged around 42% over the past year. (Prices fell by more than 1% on Tuesday.) Gold futures have also increased by about 10% since the beginning of the year and are currently 36% higher compared to a year ago. In contrast, the S&P 500 index has risen about 1.5% in 2025 and 17% over the past year. Lee Baker, a certified financial advisor, shares that he didn’t receive calls from clients about gold a year ago. Now they are a frequent occurrence.

He believes investors should remember Buffett’s classic rule: “Be fearful when others are greedy, and be greedy when others are fearful.” “I have a feeling that everyone is starting to get greedy when it comes to gold,” says Baker, owner and president of Claris Financial Advisors based in Atlanta and a member of CNBC’s Advisor Council. The typical investor should not have gold exposure exceeding 3% of a diversified portfolio, Baker says. Investors attracted by high yields may make a hasty purchase and invest a significant amount in gold (literally or figuratively)—thus making the typical investment mistake of buying high and selling low, he adds. “If you’re going to profit from gold, you have to buy it and sell it—and hope to sell it at the right moment,” says Baker. “If you’re entering now, are you buying at the top? I don’t know.”

Why Gold Prices Are Rising

Investors often perceive gold as a “safe haven” during turbulence and buy it amid high uncertainty, explains Samir Samana, senior global market strategist and head of global equities and real assets at Wells Fargo Investment Institute. “I think we can check that box now,” he says. At the same time, “in true times of crisis, bonds have performed better than gold,” Samana adds.

Additional Factors

Many investors buy gold because they consider it a good hedge against inflation, says Samana. (Data does not always support this investment thesis.) Investors are concerned about recent data suggesting that progress in reducing inflation may have stalled, he notes. U.S. sanctions against Russia from 2022 have been a “turbo charge” for gold yields over the past year and more, according to Samana. The sanctions have prompted some central banks—especially in China—to buy more gold instead of U.S. government bonds to avoid potential difficulties accessing dollar-denominated assets in the event of future geopolitical conflict, he explains. This has increased the demand for gold compared to prices a year ago—and correspondingly the prices themselves, Samana adds. “Don’t chase gold yields,” he warns. “Overall, it’s probably better to refrain from investments in precious metals at [current] levels.”

Future Expectations

Experts do not expect gold to continue shining. “There’s no reason why gold should continue a significant rise unless— and I really hope it doesn’t—a prolonged war occurs,” says Baker.

How to Invest in Gold

Baker recommends investment exposure to gold through funds like exchange-traded funds (ETFs) or through investments in gold mining company stocks, rather than through physical purchase. Funds and stocks are generally more liquid in case the investor needs to sell the asset, Baker explains. Investors with large amounts of physical gold will likely have the additional commitment to store and insure it, he says. Insurance can cost investors 1%–2% or more of the value of the gold annually. Similar to Baker, Samana believes that it is acceptable for investors to hold 1%–2% of a well-diversified portfolio in gold. Investors interested in purchasing gold should view it as part of a broader commodity exposure portfolio that likely includes investments in energy resources, agricultural products, and base metals like copper, along with precious metals, Samana says. Wells Fargo’s investment models forecast a total allocation to commodities between 2% for conservative investors and 7% for more aggressive growth strategies, he notes.