Gold Just Hit $4,000—here's How Much Experts Say To Own

With the price of gold topping $4,000 an ounce for the first time Tuesday, you might be wondering whether the precious metal should be a bigger part of your investment strategy.

Prices have soared by 54% so far this year, putting it on track for its best yearly performance since 1979.

Investors often turn to gold when they lose confidence in other assets, typically in periods of economic uncertainty or market stress, because it's seen as a store of value that holds its worth.

And when the U.S. dollar declines, gold becomes cheaper for international buyers, boosting demand. That's helped push prices higher this year, with China's central bank stockpiling gold as it moves away from U.S. securities, says Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management.

The run-up in prices is also reflected in demand for gold-backed exchange-traded funds, or ETFs — which you can buy in a brokerage account and trade like a stock — making them one of the easiest ways to invest in gold. These funds recorded their biggest month ever for investor buying in September, according to the World Gold Council.

"Gold can play a role in portfolios, providing diversification from traditional stocks and bonds," says Haworth.

How much of your investments should be in gold

Investors can get exposure to gold either by buying physical gold such as bars or coins, investing in gold-backed ETFs, or owning shares of mining companies.

But the most accessible way to invest is probably through gold-backed ETFs, which hold physical gold in vaults and generally track the metal's price.

These are "the most liquid, tax-efficient and low-cost way to invest in gold," Blair duQuesnay, a chartered financial analyst and certified financial planner, tells CNBC.

Most advisers suggest keeping gold to 5% or less of a portfolio, but Bridgewater founder Ray Dalio has been far more bullish — arguing for as much as 15% in times of market stress.

Dalio has long viewed gold as a hedge against declining trust in money and markets. He says that gold stands apart because it's "the only asset that somebody can hold and you don't have to depend on somebody else to pay you money for."

However, most advisors don't see gold as a core investment so much as a useful hedge in turbulent times. That's because it doesn't produce income or profits, and its value depends entirely on investor demand. The risk is that if prices stop climbing, investors are "stuck with a zero-earning asset," says Haworth.

The weak U.S. dollar is another factor to consider: Historically, gold and the dollar tend to move in opposite directions, with a weaker dollar making gold more attractive to global buyers. If the U.S. economy remains resilient, a stronger dollar could limit further gains in gold prices, he says.

"Given those risks, gold is at best a supporting player — perhaps 0% to 5% of a portfolio," says Haworth.

While gold has its place, "allocating too much of your portfolio to gold could come back to bite you," says Bill Shafransky, a CFP at Moneco Advisors. That said, "I don't find anything wrong with 2% to 5%, especially if that helps you sleep better at night."Want to be your own boss? Sign up for CNBC's new online course, How To Start A Business: For First-Time Founders. Find step-by-step guidance for launching your first business, from testing your idea to growing your revenue.

Source: CNBC