Nanoparticles with gold shell and iron core have unique optical and magnetic properties which can be utilized for simultaneous detection and treatment strategies. Several nanoparticles have been synthesized and shown to mediate a variety of potential applications in biomedicine, including cancer molecular optical and magnetic resonance imaging, controlled drug delivery, and photothermal ablation therapy. However, to be effective, these nanoparticles must be delivered efficiently into their targets. In this review, we will provide an updated summary of the gold-shelled magnetic nanoparticles that have been synthesized, methods for characterization, and their potential for cancer diagnosis and treatment. We will also discuss the biological barriers that need to be overcome for the effective delivery of these nanoparticles. The desired nanoparticle characteristics needed to evade these biological barriers were also explained. Hopefully, this review will help researchers in designing nanoparticles by carefully choosing the optimum size, shape, surface charge, and surface coating.