Monday, 19 May, 2025
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Gold’s meteoric rise is fueled by mounting global policy uncertainty and growing geopolitical risks. Its safe-haven appeal remains strong, with the rally driven not just by inflation fears but broader investor flight to stability.
With gold prices breaching the Rs 1 lakh mark per 10 grams, even seasoned investors are divided—should they book profits or stay the course? Market veterans caution against attempts to time the rally, recommending a steady focus on asset allocation instead.
The meteoric rise is underpinned by mounting global policy uncertainty. Amid rising geopolitical and economic instability, analysts say gold’s role as a safe-haven asset is far from over—suggesting the current rally may have more room to run. For now, gold’s rise reflects not just inflation hedging or currency weakness, but a growing shift among investors toward safe-haven assets amid geopolitical instability and fragile macroeconomic signals.
Gold prices have surged nearly 30 per cent since last Akshaya Tritiya, climbing from Rs 73,240 to the Rs 94,000–95,000 range per 10 grams, after briefly touching the psychological Rs 1 lakh mark. The yellow metal has been on a sustained bull run since mid-2024, driven by rising global policy uncertainty and fears of an economic slowdown in major economies.
Data from Ventura Securities shows that gold has delivered positive returns during every Akshaya Tritiya since 2018, reinforcing its status as a dependable hedge during turbulent times. Analysts are of the view that any escalation in geopolitical risks or a shift in US Federal Reserve policy—especially rate cuts—could unlock further upside for the yellow metal. As investors seek refuge from volatile markets and slowing growth, gold’s appeal remains strong.
Gold’s stellar performance in 2025 has been fuelled largely by a resurgence in global investment flows, particularly into exchange-traded funds (ETFs). Adding to the momentum, central banks—led by countries such as Russia, China, and India—have steadily increased their gold reserves. These nations have all upped the share of gold in their reserves. However, the rally faces headwinds. Analysts warn that if trade-related uncertainties ease, demand could soften and gold prices may cool off. For now, though, the safe-haven narrative remains firmly intact.
The precious metal’s historical role as a safe haven asset lies in its low correlation with equities and bonds, making it a reliable buffer during times of market turbulence. For instance, during the 2008 financial crisis, gold surged by 21 per cent while equities plummeted. In 2024, as global markets fluctuated, gold’s 24 per cent rise to $3,230 per ounce offered a cushion for portfolios, especially for High Net-Worth Individuals (HNIs) and mass affluent investors.
Gold mutual funds and ETFs are gaining popularity due to their ease of trading, transparency, and lower investment thresholds. In 2024, gold ETFs saw Rs 58,900 crore in assets under management, marking an 89 per cent year-on-year increase. SBI Gold Fund, for example, allows SIPs as low as Rs 100, broadening access for retail investors. Multi-asset funds, which combine gold, equities, and debt, also attract interest for diversified exposure in a single product.
Despite its appeal, gold has its caveats. The 30 per cent surge in its price has raised concerns of a potential correction, reminiscent of 2013 when prices fell by 30 per cent. Moreover, gold yields no dividends, relying solely on price appreciation, which has historically lagged behind equities in the long term (from 2014 to 2024, gold returned 178 per cent versus 185 per cent for the Nifty 50).
Over-allocating beyond 15 per cent could lead to opportunity costs, especially for mass affluent investors aiming for equity-driven growth. Experts recommend staggered investments through SIPs in gold ETFs or mutual funds to navigate market volatility.
