Recently, the gold market has started to surge wildly, approaching new highs. Many friends around me are following the trend and buying, but I’ve noticed that many people haven't really thought through what they’re doing—they just see others buying and buy also, going all in without caution, which can easily lead to pitfalls.

Speaking of whether gold preserves value, I find that most people still have some misconceptions. Gold indeed has the function of preserving value, especially during times of economic instability and inflation, where it can serve as a safe haven. But the key point is, this preservation of value is often only realized when you actually cash it out. If you buy gold jewelry and keep it at home, it can’t generate income, and you also have to worry about theft or loss. When you need money urgently, you might be reluctant to sell your beautiful jewelry, which makes it more of a burden than an asset.

Another very practical issue is that many people buy gold jewelry rather than investment-grade gold. Gold jewelry includes high craftsmanship costs and brand premiums, but when you want to cash out, the resale price is only based on the international gold price, with no regard for the craftsmanship or brand premium. This results in buying expensive and selling cheap, which isn’t cost-effective as an investment. So, whether gold preserves value depends on how you buy it.

If someone gave me 10,000 yuan now, I would buy gold, but definitely not go all in. I would treat it as part of an asset allocation, not as a speculative tool. According to professional advice, a reasonable allocation of gold in a household’s assets is usually around 5% to 15%. Considering that gold prices are currently relatively high, I might only allocate 3,000 to 5,000 yuan to buy in installments, and the rest should be invested or used for daily expenses.

When I buy, I wouldn’t buy recklessly. If it’s truly for investment purposes, I would choose investment bars or stored gold, which have lower costs and are easier to cash out in the future, unlike gold jewelry with many additional costs.

For me, gold’s role is more like a bulletproof vest in an asset portfolio, rather than a get-rich-quick tool. When the stock market crashes or currency depreciates, gold can help balance the portfolio. I am willing to pay a premium for certain commemorative coins or exquisitely crafted jewelry, but I understand that’s consumption, not investment. Honestly, the shine of gold can indeed bring psychological satisfaction and a sense of security, which is part of why it’s so popular.

Here are a few tips for friends who are interested: First, clarify your purpose. If it’s for wearing or for beauty, buy gold jewelry, choose appealing craftsmanship and styles, and don’t worry too much about gold price fluctuations. If it’s for investment and preservation of value, buy gold bars, coins, or gold ETFs—keep it simple and ignore complicated additional conditions.

Second, never chase the high blindly. Gold prices are currently at a relatively high level, and volatility may increase. Don’t buy all-in just because you’re afraid of missing the rise, ignoring the risks. Dollar-cost averaging is often a more stable way for ordinary people to participate in gold investment. Lastly, be aware of your psychological biases: don’t be greedy and refuse to sell when prices go up, don’t panic sell when prices fall, and don’t get jealous when others show off their gold holdings—don’t risk your living expenses for the sake of greed.

In the end, gold is not useless, but it’s not a miracle cure either. Treat it as a piece of body armor in your asset portfolio, not as a machine gun. Rational allocation is the right way to approach it.