A portfolio with a target weight in precious metals does not keep that weight on its own. Whatever rule is used to restore it determines how the position actually behaves over time.
Drift is the reason the rule exists
Prices move at different rates, so a position set at one weight arrives at a different weight within months without anyone buying or selling anything.
Metals drift particularly visibly, because they move on different drivers from equities and can rise strongly while other holdings are flat.
Left alone, a portfolio ends up weighted towards whatever has performed best, which is the opposite of the exposure that was originally chosen.
Calendar rules trade on the clock
A calendar rule restores target weights at fixed intervals regardless of how far anything has moved.
It is simple to follow and produces a predictable number of transactions, which matters when each trade carries a dealing spread.
Its weakness is that it can ignore a large move that happens between review dates and then act on a small one that happens to fall on a review date.
Threshold rules trade on distance
A threshold rule acts only when a holding has drifted beyond a set distance from its target, whenever that occurs.
This responds to actual movement rather than to the calendar, so it tends to act during volatile periods and stay quiet during calm ones.
The cost is unpredictability: a turbulent stretch can trigger several adjustments in quick succession, each carrying its own transaction cost.
The rule imposes a contrarian discipline
Whichever form is used, rebalancing sells part of what has risen and buys more of what has fallen. That is uncomfortable and it is the point.
Applied to metals, it means trimming a position after a strong run and adding to it after a decline, both of which most holders find difficult to do by judgement alone.
The rule removes the decision from the moment, which is its main practical contribution rather than any improvement it might make to returns.
Costs and structure shape the choice
Physical metal carries a dealing spread on every transaction, so frequent rebalancing in bars and coins is expensive compared with rebalancing in exchange traded products.
Where a portfolio holds metal in more than one form, the rebalancing can often be directed to the cheapest form to trade while the physical holding is left undisturbed.
That keeps the exposure at its target without repeatedly paying retail premiums on metal that was never meant to circulate.