Gold has had a remarkable run.
The safe-haven asset hit an all-time high price of US$5,589.38 on 28 January 2026 – nearly doubling in price within a year – before settling around the US$4,700-mark today.
If you have been holding gold, you are likely sitting on a tidy profit.
Yet, at the same time, certain stock market sectors have also delivered impressive gains.
This has led many investors to wonder: “Should I rotate from gold into stocks now?”
Why Investors Buy Gold in the First Place
Gold provides no dividends, nor does it compound earnings.
Yet, gold is prized for its ability to preserve purchasing power when inflation erodes the value of currencies.
This ability to withstand economic shocks makes gold a classic defensive asset that often thrives during periods of sustained volatility.
The 2025 surge, for instance, was a result of tariff uncertainty, a weakening US dollar, and rising inflation expectations, which drove central banks and retail investors to accumulate the metal.
Historically, when traditional assets stumble, gold often shines.
The Case for Holding Gold
In light of ongoing geopolitical tensions, it may still be prudent to hold onto gold.
Furthermore, because gold is primarily denominated in US dollars, a weakening greenback provides a natural tailwind for the metal’s price.
Beyond its role as a crisis hedge, gold offers an excellent diversification opportunity.
The precious metal tends to have a low correlation with other asset classes, such as equities or fixed income, providing a layer of protection when traditional portfolios face pressure.
The Case for Owning Stocks Instead
Owning stocks represents a stake in productive businesses that generate earnings, pay dividends, and compound wealth over the long run.
Consider Venture Corporation Limited (SGX: V03); since its listing, the company has delivered significant capital growth while steadily raising its dividends from S$0.50 in FY2014 to S$0.80 for FY2025.
This means investors not only earn from recurring income streams through dividends, but also from capital appreciation.
Historically, equities have consistently outpaced gold over long-term horizons.
Excluding gold’s extraordinary 2025 surge, gold recorded a 10-year average annual return of 3.67% from 2014 to 2024.
In contrast, the S&P 500 delivered returns of 13.39% over the same period.
Beyond performance, stocks offer superior flexibility, allowing investors to diversify across various industries and geographies.
Equities also offer superior liquidity, enabling investors to enter or exit positions with ease on public exchanges.
When It Might Make Sense to Sell Gold and Buy Stocks
Improving Economic Outlook
When the economy strengthens, productive assets like equities become more appealing.
During these periods of expansion, reallocating capital from gold into stocks allows you to capture the upside of a growing economy.
Attractive Stock Valuations
Market volatility often creates opportunities where high-quality companies trade at significant discounts to their intrinsic values.
It would be a good time to “shop” for blue-chip firms trading at attractive price-to-earnings (P/E) ratios.
For example, Singapore Airlines Limited (SGX: C6L) and Singapore Telecommunications Limited (SGX: Z74) are currently trading at P/E multiples of 9x and 12x respectively.
Entering at a lower valuation – provided business fundamentals remain strong – provides a wider margin of safety and greater potential for long-term capital appreciation.
Rising Corporate Earnings
When companies are consistently increasing profits, it signals healthy business conditions and can drive market optimism.
In such cases, reallocating from gold into equities allows investors to participate in that earnings growth.
When It May Be Better to Hold or Keep Gold
Ongoing Market Uncertainty
Gold thrives on instability.
During periods of economic shifts or geopolitical tension, gold is often viewed as a safe-haven asset because it retains value more effectively than riskier assets.
Portfolio Diversification Needs
Gold typically moves differently from stocks and bonds.
When equity markets decline, gold may remain stable or even rise, adding a layer of balance and reducing overall portfolio risk.
Overvaluation in Stocks
It can be risky to enter when stock markets appear overpriced, with P/E ratios significantly higher than historical averages.
During these periods, gold can be a defensive sanctuary to preserve capital while investors wait for more attractive entry points.
How to Approach the Decision Practically
When deciding if you should rotate from gold into stocks, it doesn’t have to be an all-or-nothing approach.
Instead, consider rebalancing your portfolio gradually.
This helps to reduce the risk of mistiming the market and smooths out your entry points into new equity positions – similar to the Dollar Cost Averaging (DCA) approach.
Diversification can also help to mitigate the risks of volatility.
Maintaining a core gold position while owning stocks from various industries and geographies can reduce reliance on any single asset class.
Ultimately, any changes should align with your long-term financial goals and your personal risk tolerance.
A balanced, disciplined strategy is always more effective than reacting to short-term market noise.
Get Smart: Finding Your Right Balance Is The Key
Instead of choosing between stocks and gold, you should create an optimal portfolio depending on your current allocation, objectives, and risk tolerance.
On one hand, gold offers safety and protection against volatility.
On the other hand, stocks are associated with compound returns and income.
Both of them can play a part in a healthy portfolio.
The smartest investors concentrate on building a sound portfolio, not on market noise, to help them build long-term wealth.
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Disclosure: Wenting A. does not own shares of any companies mentioned.
