DCA with Gold: Why Every EUR Portfolio Needs It
20 years of data show gold improves returns and reduces risk (2006-01 to 2025-12)
Gold is one of the most impactful additions you can make to a EUR DCA portfolio. After analyzing 20 years of real data, the pattern is clear: adding gold consistently improves returns while also reducing risk. This holds true across a wide range of equity allocations, from conservative to aggressive.
The Gold Effect: Better Returns and Less Risk
We tested adding 10% gold (replacing money market) to portfolios at three different equity levels. The results speak for themselves:
| Without Gold | Real Return | Max DD | With 10% Gold | Real Return | Max DD |
|---|---|---|---|---|---|
| 20% World / 80% MM | +22.1% | -7.3% | 20% World / 10% Gold / 70% MM | +41.8% | -6.0% |
| 30% World / 70% MM | +40.5% | -11.3% | 30% World / 10% Gold / 60% MM | +60.1% | -8.6% |
| 40% World / 60% MM | +58.8% | -16.6% | 40% World / 10% Gold / 50% MM | +78.4% | -13.6% |
Compare 30% World with vs without gold in our calculator
At every level, swapping 10% money market for gold adds +19.6% to +19.6% of real return while drawdowns improve by 1.4 to 3.0 percentage points. In investing, you almost never get both higher returns and lower risk at the same time. Gold is one of the rare exceptions.
Why Gold Works for EUR Investors
1. Crisis Protection
When equities crash, gold tends to hold steady or rise. During the 2008-2009 financial crisis, global stocks fell sharply while gold rallied. During the March 2020 COVID crash, gold briefly dipped but recovered within weeks while stocks stayed depressed for months.
To put it in numbers: 100% MSCI World had a worst unrealized loss of -37.5% over this period, while 100% gold had a worst unrealized loss of -2.6%. When you combine them, the overall portfolio behaves more smoothly because their worst periods tend not to overlap.
2. Natural EUR/USD Hedge
Gold is priced in USD globally, but it tends to rise when the dollar weakens against the euro. For EUR investors holding US equities like the S&P 500 or MSCI World (which is roughly 70% US stocks), a falling dollar hurts your returns. Gold partially offsets that loss, making it a more natural currency hedge than simply diversifying into non-US equities.
3. Inflation Protection
Gold returned +259.4% nominal in EUR over 20 years via DCA. Its real (inflation-adjusted) return was +181.9%, comfortably ahead of cumulative Eurozone inflation. In 2022, when Eurozone inflation hit 8.4% and bonds fell, gold rose around 9% in EUR. During the one year when investors most needed inflation protection, gold delivered.
Gold DCA Performance (100% Gold)
Before looking at optimal allocations, here is how 100% gold compares to 100% equities over the full 20-year period:
| Metric | 100% Gold | 100% S&P 500 | 100% MSCI World |
|---|---|---|---|
| Nominal return | +259.4% | +390.0% | +242.7% |
| Real return | +181.9% | +284.3% | +168.8% |
| Max drawdown | -36.6% | -46.8% | -48.8% |
| Worst unrealized loss | -2.6% | -35.6% | -37.5% |
Compare these in our calculator
Gold delivered solid returns on its own, but with a hefty drawdown during the 2012-2015 gold price correction. Equities outperformed on both return and risk-adjusted metrics. The real value of gold is not as a standalone investment. It shines as a 10-20% portfolio diversifier, where it lifts returns and smooths out the ride. We do not recommend a 100% gold portfolio.
How Much Gold? The Optimal Allocation
Holding MSCI World at 30% and adjusting the gold/money market split lets us see the marginal impact of each additional 10% in gold:
| Portfolio | Real Return | Max DD |
|---|---|---|
| 30% World / 0% Gold / 70% MM | +40.5% | -11.3% |
| 30% World / 10% Gold / 60% MM | +60.1% | -8.6% |
| 30% World / 20% Gold / 50% MM | +79.7% | -11.1% |
| 30% World / 30% Gold / 40% MM | +99.4% | -15.9% |
Compare these in our calculator
The biggest improvement comes from the first 10%. Going from 0% to 10% gold adds 19.6pp of real return and moves the drawdown from -11.3% to -8.6%. Each additional 10% still helps returns, but the drawdown starts creeping back up once you pass 20%. For most EUR portfolios, 10-20% gold hits the sweet spot between extra return and manageable risk.
Which Gold ETF to Use
For European DCA investors, Xetra-Gold (4GLD.DE) is the top choice:
- No explicit TER. Custody costs are covered by the bid-ask spread and gold lending revenue.
- Physically backed. Each unit represents roughly 1 gram of gold stored in a Frankfurt vault.
- EUR-denominated, so there is no currency conversion when buying.
- Tax advantage in Germany: gains are tax-free after a 1-year holding period.
If Xetra-Gold is not available on your broker, alternatives include Invesco Physical Gold (SGLD.L, 0.12% TER) or iShares Physical Gold (IGLN.L, 0.12% TER). All three are physically backed and widely available across European brokers.
Frequently Asked Questions
How much gold should I have in my DCA portfolio?
Our 20-year EUR data (2006-01 to 2025-12) shows that 10% gold consistently improves both returns and reduces drawdowns at every equity level. For example, adding 10% gold to a 30% MSCI World portfolio boosted real return from +40.5% to +60.1% while the drawdown went from -11.3% to -8.6%. The sweet spot for most investors is 10-20% gold.
What is the best way to invest in gold via DCA in Europe?
Xetra-Gold (4GLD.DE, ISIN DE000A0S9GB0) is the top choice for EUR investors. It has no explicit TER, is physically backed by gold stored in Frankfurt, and trades on Xetra in EUR. In Germany, gains are tax-free after a 1-year holding period. For other countries, Invesco Physical Gold (SGLD.L) at 0.12% TER is a solid alternative.
Does gold protect against inflation?
Yes. Gold returned +259.4% nominal in EUR over 20 years via DCA, well above cumulative Eurozone inflation. Its real return was +181.9%. Gold tends to perform especially well during high-inflation periods, like 2022 when Eurozone inflation hit 8.4% and most other assets fell.
Should I buy physical gold or gold ETFs for DCA?
For DCA, gold ETFs and ETCs are far more practical. Physical gold carries premiums of 5-15% over spot, involves storage costs, and cannot be bought in small fractional amounts each month. Gold ETCs like Xetra-Gold are physically backed (you can even request delivery of the gold) but trade like stocks at spot price.
Is 100% gold a good portfolio?
No. While 100% gold returned +259.4% nominal over 20 years, its max drawdown was -36.6% and worst unrealized loss hit -2.6%. Compare that to MSCI World at +242.7% nominal with -48.8% drawdown. Gold works best as a 10-20% diversifier, not as a standalone investment.
Test It Yourself
Use our free DCA calculator to see exactly how adding gold changes your portfolio. Try 0% gold vs 10% gold vs 20% gold with 30% MSCI World, and watch the difference in both returns and drawdown.
For broader allocation advice, read our EUR investor guide. If you are new to dollar-cost averaging, start with what is DCA.