Should TFSA Investors Buy Gold on a Dip?

Gold is often considered a safe haven investment to fight inflation. Thus, only a small portion of the portfolio is allocated to gold stocks as it doesn’t generate significant returns in a growing economy. However, times have changed, and gold stocks have outperformed the market, delivering returns equivalent to high-growth stocks. If gold stocks are enjoying significant growth, should you invest in them through the Tax-Free Savings Account (TFSA)?

After all, a TFSA allows your investment to grow tax-free and also allows you to withdraw it tax-free.

Should TFSA investors buy gold on a dip?

Over the last five years, the gold price surged 173% from a little above US$1,600/oz to US$4,785/oz, and this is when the gold price dipped in March because of the Iran war. Before March, the price crossed US$5,300/oz.

Behind the gold price rally is gold buying by central banks worldwide. The fear of de-dollarization, tariffs, and wars is encouraging many countries’ central banks to increase their gold reserves. China has been buying gold for 17 straight months since March, according to Reuters. Poland and Kazakhstan also increased gold buying.

Gold dipped briefly in March as the Iran war suddenly increased inflation. Investors adopted a cautious approach over fears of an interest rate hike. While gold moves directly proportional to interest rate decisions, it is a commodity you ought to own in your TFSA amid uncertainty.

Why is gold a must buy?

If you understand the economic correlation between gold and paper currency, you will know why gold is a buy in the current geopolitical turmoil.

Gold serves as a medium of exchange with no counterparty risk or credit risk. Physical gold carries value because it is rare, and you can’t increase its supply suddenly. Thus, when gold demand increases, the price of gold increases.

Central banks print money at times of need without any gold backing. When paper currency is available in abundance, its value decreases. Countries used the US dollar as a reserve currency because the US has the largest gold reserves, and it is used for buying oil in global markets. The value of the dollar depends on the credit risk of the United States, which has been declining in the last few years. In May 2025, Moody’s downgraded the United States’ long-term credit rating from top-tier Aaa to Aa1, citing unsustainable fiscal deficits, a $36 trillion+ debt load, and mounting interest payments.

Higher credit risk increases interest rates on these Treasury bonds. If countries reduce buying US Treasuries, the value of the dollar will fall, and that of gold will increase. The significant jump in gold prices in the last few years created a historic moment, where gold surpassed US Treasuries in global reserves. Central banks now hold nearly $4 trillion in gold and ~$3.9 trillion in US Treasuries, because the value of gold has increased significantly.

If central banks are buying gold more than dollars, so should you.

Which gold stocks to buy in a TFSA?

Gold buying will continue for a long time, making gold stocks an ideal investment for a TFSA. Canada’s three gold stocks, Barrick Mining (TSX: ABX), Kinross Gold (TSX: K), and Lundin Gold (TSX: LUG), are worth buying on the dip. Barrick is a buy because it is Canada’s largest gold producer, but also has the highest all-in-sustaining cost (AISC) among the three, which stabilizes share price momentum. Lundin is a buy because it has the lowest AISC, but its smaller size makes it more volatile. Kinross has a significantly higher AISC and gold production than Lundin and slightly below Barrick’s.

If you have the appetite to buy only one stock, consider buying Kinross at the dip, then Lundin, and then Barrick. Barrick stock fell 26%, Kinross 27.8%, and Lundin 24.5% between March 2 and 20. Kinross not only led the dip, but also the rally, as its share price surged 131% over the last 12 months, while Barrick and Lundin stocks surged 112% and 124.6%, respectively.