The break-neck rally in gold prices over the last two months on the back of growing global uncertainty has enthused retail investors but experts advise to approach it with a pinch of caution.
Domestic gold prices per 10 grams have already crossed the ₹1 lakh mark on Tuesday and the bullish undertone still remains intact.
The yellow metal has surged over 26 per cent or ₹20,800 per 10 grams so far in 2025.
However, gold prices on Wednesday fell two per cent to ₹96,085 per 10 grams against ₹98,484 logged on Tuesday, according to the Indian Bullion and Jewellers Association of India data. This follows the drop in spot gold prices on Comex by 0.7 per cent to $3,357 an ounce, while US gold futures dropped 1.5 per cent to $3,367 an ounce after US President Donald Trump signalling truce in trade war with China.
Balanced portfolio
Puneet Singhania, Director, Master Trust Group, said just as tariffs and risk of potential tariff war drove gold to new high, a hint of de-escalation can reverse those gains in no time.
After the recent gold price surge, many investors portfolio may have turned overweight on gold and it seems a good opportunity to rebalance by shifting some allocation towards equities, he said.
As Indian equities have fallen in recent months, many fundamentally strong stocks are now trading at attractive valuations and it opens up an opportunity for long-term investors to accumulate quality businesses at discounted prices, he added.
Indians crave for gold
As things stand, Indian households own 27,000 tonne of gold much higher than the collective reserves of the world’s top 10 central banks including those of the US, Germany, Italy, France, Russia, China, Switzerland, India, Japan and Turkey. India consumes about 750-800 tonnes per annum, mostly in jewellery form.
Interestingly, after the sharp surge in gold prices the percentage of gold jewellery purchases involving exchanges has increased from about 20 per cent to 50 per cent.
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions, said retail investors should have a cautious outlook on gold as any political or economic developments, particularly a resolution of the trade tariff dispute between the US and China, would correspondingly impact demand for gold as a safe-haven asset and could bring prices down.
Instead of chasing some short-term gains in gold, he added retail investors should allocate 10-15 per cent of portfolio to gold in a volatile world with rapid changes in the global economy.
Manav Modi, Senior Analyst, Commodity Research, Motilal Oswal Financial services said investors should maintain a cautious yet optimistic outlook on the current gold price rally.
The ongoing geopolitical tensions, a volatile dollar index, central bank buying and fears of slower global growth will continue to provide underlying support to gold prices, he said.
Lower interest rates in the US tend to support gold prices, hence rising expectations for interest rate cuts should be taken as a positive signal for gold. However, investors should be mindful of potential dips driven by shifts in market sentiment or geopolitical developments that might ease gold’s safe-haven appeal, he said.
Published on April 23, 2025
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