Gold and silver sit awkwardly in most portfolio frameworks. They pay no coupon and no dividend, and there are no earnings to discount. Yet central banks hold gold as a reserve asset, and private investors continue to hold both.
This piece sets out how we think about precious metals in a private portfolio: what drives them, how they can be held, what holding them costs, and how to size them. It contains no price view.
Gold and the cost of holding it
Gold has no yield. The main cost of owning it is therefore what the same money could earn elsewhere. The World Gold Council calls this opportunity cost, and describes gold as becoming more attractive as bond yields fall or as currencies weaken, the US dollar in particular, and less attractive when the reverse happens (World Gold Council, Gold Mid-Year Outlook 2026).
When cash and government bonds pay a positive return after inflation, holding an asset that pays nothing costs more. When that real return falls, the cost of holding gold falls with it.
Rates and the dollar are only part of the picture. The Council's attribution framework groups the drivers of gold's returns into four categories: economic expansion, risk and uncertainty, opportunity cost, and momentum (World Gold Council, Gold Outlook 2026).
The balance between those drivers shifts. For about a decade, gold was inversely correlated with US real interest rates. Since 2022 that link has been counterbalanced by other factors. Real rates rose, and gold also generally rose, supported by investors seeking to manage risk and by central bank buying (World Gold Council, June 2025).
The implication is that gold is a poor proxy for a view on interest rates. Its drivers rotate. In some periods the cost of carry dominates. In others, demand for protection against geopolitical or financial stress outweighs it.
What would change this view is a return to the earlier pattern. If gold again tracked real rates closely, it would behave more like a long-duration bond position, and its value as a diversifier against a bond allocation would shrink. We watch the relationship between gold and real yields for that reason.
Central banks as a source of demand
Official buying has become one of the larger forces in the gold market. Central banks bought more than 1,000 tonnes in each year from 2022 to 2024. In 2025 they bought 863 tonnes, which the World Gold Council notes was well above the 2010 to 2021 annual average of 473 tonnes (World Gold Council, Gold Demand Trends full year 2025).
Buying continued in 2026. Central banks added 289 tonnes in the second quarter, a record for a second quarter and 62 per cent more than a year earlier, taking first-half purchases to 345 tonnes (World Gold Council, Gold Demand Trends Q2 2026).
The Council links this demand to reserve diversification, protection against geopolitical and financial-market uncertainty, and gold's role as a long-term store of value. In its survey of reserve managers, 89 per cent of respondents expected global central bank gold reserves to rise over the next year, and a record 45 per cent expected their own institution to add to its holdings (World Gold Council, Gold Demand Trends Q2 2026).
Reserve managers work on horizons of years. Their buying gives the market a participant whose motives are strategic, and it helps explain why gold rose alongside real rates after 2022. That demand is still sensitive to price. The Council attributes the lower 2025 total to more cautious purchasing at elevated valuations (World Gold Council, Gold Demand Trends full year 2025).
A sustained slowdown in official purchases would change our view. So would evidence that reserve managers regard their gold allocations as complete. Either would remove a source of support that has mattered since 2022.
Silver has two jobs
Silver shares part of gold's monetary history, and investors hold it as a store of value. Unlike gold, most of its demand comes from industry. In 2025 industrial uses accounted for 657.4 million ounces of total silver demand of 1,130.6 million ounces, according to The Silver Institute's World Silver Survey 2026. Electrical and electronics uses took 449.5 million ounces, of which photovoltaics took 186.6 million.
That gives silver two sets of drivers. It responds to many of the same monetary and risk factors as gold. It also responds to the industrial cycle and to choices made on factory floors. The same survey reports that photovoltaic demand fell 6 per cent in 2025, after more than doubling between 2020 and 2024, as solar cell makers thrifted and substituted silver more quickly. It expects photovoltaic demand to fall a further 19 per cent in 2026.
Silver has tended to be more volatile than gold. A smaller market pulled by two sets of forces can move further in both directions. The survey records a sharp rise in silver price volatility since late 2025, which it links partly to momentum-driven buying and leveraged products. For a private portfolio, a unit of capital in silver carries more risk than the same unit in gold, and position size should reflect that.
What would change this view is a durable shift in the balance between silver's two roles. Faster substitution in solar would weaken the industrial leg further. Growth in grid, automotive and AI-related electronics, which the survey names as partial offsets, would strengthen it. Either would change how closely silver follows gold.
Ways to hold metal
There are four common routes, and each carries a different mix of ownership, convenience and counterparty exposure.
Unallocated accounts. The holder has a claim on the account provider for an amount of metal, with no specific bars set aside. The LBMA notes that a credit balance on such an account gives the owner credit exposure to the institution where the account is held. Unallocated accounts are convenient and allow fractional amounts.
Allocated accounts and vaulted bars. Here specific bars are held for the client and identified on a bar list showing each bar's number, weight and fineness. The LBMA describes the holder as having no credit exposure to the institution that maintains the account, in the way a safe deposit box works. A standard Good Delivery bar weighs approximately 400 troy ounces for gold and 1,000 troy ounces for silver (LBMA), so many private holders use smaller bars or a share of vaulted metal.
Exchange-traded products. These are listed funds or notes that track a metal price. The holder owns units in the product and relies on its structure, custodian and documentation. It matters whether the product holds physical metal, whether that metal is allocated, and where it is stored.
Futures. Futures give price exposure without holding metal. They require margin, and positions must be rolled as contracts expire. They suit tactical or hedging use by investors equipped to manage margin and rolling. For most long-term private holdings, they add operational demands without adding ownership.
The choice turns on what the holder is protecting against. If the purpose of the holding is protection against stress in the financial system, credit exposure to a financial institution works against that purpose. If the purpose is diversification within a liquid portfolio, convenience and liquidity may weigh more.
A change in the holder's purpose would change the route. So would a change in how a product holds or reports its metal, or in the terms on which a provider treats unallocated claims.
Costs and custody
The LBMA notes that unallocated accounts carry a maintenance fee, typically calculated in basis points on the value of the metal and charged quarterly, while allocated accounts carry storage fees that vary between operators (LBMA).
Beyond those fees sit insurance, dealer spreads on physical purchases and sales, and product fees on exchange-traded holdings. Because metal earns nothing, these costs are a direct drag on the holding, year after year.
For clients based in the UAE, local custody is a practical option. DMCC states that Dubai accounts for 15 per cent of global gold trade, the majority of which flows through DMCC, and it operates a vault that stores gold and silver bullion among other high-value assets (DMCC).
Custody location is a jurisdictional choice as well as a logistical one. We treat it as part of the structuring conversation, alongside who holds title and on what terms.
A change in the fee structure of a chosen route, or in the standing of a custodian or product issuer, would prompt us to revisit how a holding is held.
Sizing as a principle
We size precious metals by the job they are meant to do in the whole portfolio. A position held as a hedge against financial stress is judged by how it behaves when other holdings fall. Its return in isolation says little.
Three principles guide us. First, the position should be large enough to matter in a stress scenario and small enough to hold through long flat periods, when it earns nothing and costs something to keep. Second, silver's higher volatility means a smaller allocation can carry the same risk as a larger one in gold. Third, rebalancing keeps the holding at its intended weight. It trims after strong runs and adds after weak ones, which stops a hedge from quietly becoming a concentrated position.
What would change our approach to sizing is a change in how the metals relate to the rest of the portfolio. If gold began to move closely with equities or with bonds, its diversifying role would weaken, and the case for a meaningful allocation would weaken with it.
This article is general commentary on how precious metals can sit in a portfolio. It is not personal advice or a recommendation to buy or sell.