Gold Hits Record Highs: Should You Add It to Your ISA?

Purple Flower

Gold just broke record highs again. Here's the honest answer on whether it belongs in your ISA.

Why is gold hitting record highs in 2026?

Three big reasons. First, ongoing Middle East tensions and broader geopolitical uncertainty are pushing investors towards traditional "safe haven" assets. Second, central banks, especially in Asia, have been buying gold aggressively to diversify away from US dollar reserves. Third, persistent inflation concerns have revived gold's reputation as a store of value when paper currencies lose purchasing power.

When these forces line up, gold tends to rally, and it has. Gold is now trading at levels that seemed unthinkable just a few years ago. The question for UK investors is whether to chase it, hold some as insurance, or stay out entirely.

Can you hold gold inside a Stocks and Shares ISA?

Yes. You can't put physical gold bars or coins inside an ISA, but you can hold gold ETFs, gold mining company shares and gold-focused investment funds inside a Stocks and Shares ISA. The most popular option for retail investors is a physical gold ETF, which tracks the price of gold and is backed by actual gold bullion held in a vault. Popular examples include Invesco Physical Gold ETC and iShares Physical Gold ETC.

All returns from gold held inside your ISA are tax-free. This matters because capital gains on gold held outside an ISA can trigger tax once you exceed the annual £3,000 CGT allowance, which is very easy to do if gold has been running at record highs.

Is gold actually a good investment?

Honestly, the evidence is mixed. Over very long periods (50 years or more), gold has roughly matched inflation but meaningfully underperformed equities. Over shorter periods, gold can outperform sharply, especially during crises. It produces no income, no dividends and no earnings, so its value depends entirely on what the next buyer is willing to pay.

That said, gold has historically been weakly correlated with equities, meaning it often holds up or rises when stock markets fall. For investors looking to reduce portfolio volatility, a small gold allocation has genuine diversification value, even if its long-term return is lower than equities.

How much gold should you actually hold?

Most sensible portfolio frameworks suggest between 0% and 10% of your total investments in gold. A common "middle-ground" allocation is around 5%. Any more than 10% and you're making a significant bet on gold specifically, which historically has not been rewarded over long periods. Any less than a few per cent and the diversification benefit is too small to matter.

For many younger investors, 0% is actually reasonable. If your time horizon is 20-40 years and your main goal is long-term wealth building, equity returns have historically done the job far better than gold. Gold becomes more attractive as you get closer to needing the money, or as a small insurance policy against equity crashes.

Is now a bad time to buy gold at record highs?

It's the wrong question. "Gold at record highs" sounds like a clear warning, but gold has hit many record highs throughout its history and gone on to make new ones. Trying to time gold specifically is as hard as timing any other asset. What matters more is your allocation framework: if you'd decided a 5% gold allocation makes sense for you, it still makes sense whether gold is up 40% this year or down 20%.

What you should avoid is chasing gold now because of headlines. Buying 20-30% of your portfolio in gold because it's been rallying is a classic retail investor mistake. You end up overweight an asset right before it underperforms, and you've added concentration rather than diversification.

Are gold mining shares a better bet than physical gold?

Not necessarily. Gold mining companies often move more dramatically than gold itself, rising faster when gold rises and falling harder when it falls. They come with operational risk (mine accidents, cost overruns, political issues in mining countries) that pure gold exposure doesn't have. They also pay some dividends, which pure gold doesn't.

For most UK investors looking for gold exposure, a physical gold ETF is simpler, cheaper and more predictable than a gold mining fund. If you want both exposure and some growth potential, a small allocation to a gold mining fund alongside physical gold can make sense, but it's a more advanced choice.

Where Mona Fits

Mona focuses on diversified long-term investing, which for most people means a globally diversified equity portfolio as the core of an ISA. Gold isn't a core holding in this approach, but nothing stops you from holding a small gold position alongside your main portfolio inside the same ISA. The key is that everything you hold inside your ISA grows tax-free, including any gold allocation you decide on.

The Bottom Line

Gold at record highs isn't a reason to pile in, but it's also not a reason to panic. A small allocation (0-10%) can add genuine diversification to a portfolio, especially as you get closer as needing the money. Younger investors with long time horizons typically don't need gold, because equities have historically done the job better over 20+ years. Any gold you do hold is best kept inside an ISA, where the gains stay tax-free. The cardinal sin is chasing gold after a rally and ending up overweight just before a fall.

Build your long-term wealth on a solid core, not on hot headlines. Start your ISA with Mona today.

For impartial information and guidance on investing, visit MoneyHelper.org.uk.

Join Mona’s early access waitlist

Join the waitlist

All articles

Gold Hits Record Highs: Should You Add It to Your ISA?

Purple Flower

Gold just broke record highs again. Here's the honest answer on whether it belongs in your ISA.

Why is gold hitting record highs in 2026?

Three big reasons. First, ongoing Middle East tensions and broader geopolitical uncertainty are pushing investors towards traditional "safe haven" assets. Second, central banks, especially in Asia, have been buying gold aggressively to diversify away from US dollar reserves. Third, persistent inflation concerns have revived gold's reputation as a store of value when paper currencies lose purchasing power.

When these forces line up, gold tends to rally, and it has. Gold is now trading at levels that seemed unthinkable just a few years ago. The question for UK investors is whether to chase it, hold some as insurance, or stay out entirely.

Can you hold gold inside a Stocks and Shares ISA?

Yes. You can't put physical gold bars or coins inside an ISA, but you can hold gold ETFs, gold mining company shares and gold-focused investment funds inside a Stocks and Shares ISA. The most popular option for retail investors is a physical gold ETF, which tracks the price of gold and is backed by actual gold bullion held in a vault. Popular examples include Invesco Physical Gold ETC and iShares Physical Gold ETC.

All returns from gold held inside your ISA are tax-free. This matters because capital gains on gold held outside an ISA can trigger tax once you exceed the annual £3,000 CGT allowance, which is very easy to do if gold has been running at record highs.

Is gold actually a good investment?

Honestly, the evidence is mixed. Over very long periods (50 years or more), gold has roughly matched inflation but meaningfully underperformed equities. Over shorter periods, gold can outperform sharply, especially during crises. It produces no income, no dividends and no earnings, so its value depends entirely on what the next buyer is willing to pay.

That said, gold has historically been weakly correlated with equities, meaning it often holds up or rises when stock markets fall. For investors looking to reduce portfolio volatility, a small gold allocation has genuine diversification value, even if its long-term return is lower than equities.

How much gold should you actually hold?

Most sensible portfolio frameworks suggest between 0% and 10% of your total investments in gold. A common "middle-ground" allocation is around 5%. Any more than 10% and you're making a significant bet on gold specifically, which historically has not been rewarded over long periods. Any less than a few per cent and the diversification benefit is too small to matter.

For many younger investors, 0% is actually reasonable. If your time horizon is 20-40 years and your main goal is long-term wealth building, equity returns have historically done the job far better than gold. Gold becomes more attractive as you get closer to needing the money, or as a small insurance policy against equity crashes.

Is now a bad time to buy gold at record highs?

It's the wrong question. "Gold at record highs" sounds like a clear warning, but gold has hit many record highs throughout its history and gone on to make new ones. Trying to time gold specifically is as hard as timing any other asset. What matters more is your allocation framework: if you'd decided a 5% gold allocation makes sense for you, it still makes sense whether gold is up 40% this year or down 20%.

What you should avoid is chasing gold now because of headlines. Buying 20-30% of your portfolio in gold because it's been rallying is a classic retail investor mistake. You end up overweight an asset right before it underperforms, and you've added concentration rather than diversification.

Are gold mining shares a better bet than physical gold?

Not necessarily. Gold mining companies often move more dramatically than gold itself, rising faster when gold rises and falling harder when it falls. They come with operational risk (mine accidents, cost overruns, political issues in mining countries) that pure gold exposure doesn't have. They also pay some dividends, which pure gold doesn't.

For most UK investors looking for gold exposure, a physical gold ETF is simpler, cheaper and more predictable than a gold mining fund. If you want both exposure and some growth potential, a small allocation to a gold mining fund alongside physical gold can make sense, but it's a more advanced choice.

Where Mona Fits

Mona focuses on diversified long-term investing, which for most people means a globally diversified equity portfolio as the core of an ISA. Gold isn't a core holding in this approach, but nothing stops you from holding a small gold position alongside your main portfolio inside the same ISA. The key is that everything you hold inside your ISA grows tax-free, including any gold allocation you decide on.

The Bottom Line

Gold at record highs isn't a reason to pile in, but it's also not a reason to panic. A small allocation (0-10%) can add genuine diversification to a portfolio, especially as you get closer as needing the money. Younger investors with long time horizons typically don't need gold, because equities have historically done the job better over 20+ years. Any gold you do hold is best kept inside an ISA, where the gains stay tax-free. The cardinal sin is chasing gold after a rally and ending up overweight just before a fall.

Build your long-term wealth on a solid core, not on hot headlines. Start your ISA with Mona today.

For impartial information and guidance on investing, visit MoneyHelper.org.uk.

Join Mona’s early access waitlist

Join the waitlist

All articles