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'If gold's recent surge has increased its allocation beyond 15 per cent in your portfolio, now may be a good time to rebalance.'
Gold is trading at all-time highs. It is closing in on the psychologically significant $3,000 per ounce mark in the international market.
It also surpassed Rs 86,000 per 10 grams on the Multi Commodity Exchange (MCX).
"In 2024, gold posted domestic gains exceeding 20 per cent. The momentum has continued in 2025, with year-to-date gains exceeding 10 per cent. We maintain a buy-on-dips stance," says Akash Hariani, joint managing director, Motilal Oswal Private Wealth.
Factors behind the surge
Geopolitical tensions and fears of trade wars due to anticipated US tariff announcements are the key drivers of gold prices.
"Safe-haven demand for gold is rising amid concerns over global economic growth due to the new US administration's protectionist policies and their inflationary impact on US domestic prices," says Gnanasekar Thiagarajan, co-founder and CEO, Commtrendz.
Outlook for yellow metal
Strong demand for exchange-traded funds (ETFs), an expected revival in Chinese gold consumption, and steady Indian imports are likely to keep prices firm.
"Since the start of this year, demand-supply dynamics have driven gold. Expectations of a consumption rebound in China, aggressive central bank purchases, and rising investment demand have further boosted gold demand," says Hariani.
Central banks' efforts to diversify their reserves are also playing a part.
"Central banks in BRICS regions are increasing gold reserves, exerting upward pressure on prices," says Bharat Lahoti, co-head, factor investing, Edelweiss Mutual Fund (MF).
Trend could reverse
Experts advise caution at current levels.
"In the medium term, if and when negotiations bring about amicable solutions (to conflicts), gold's safe-haven appeal may diminish, triggering a strong correction," says Thiagarajan.
Hariani also cautions against increasing exposure at these elevated levels, especially for the short term.
"Short-term investors may face challenges. Policy shifts by the Federal Reserve, easing global uncertainties, and a slowdown in central bank purchases could limit price growth in the medium term," says Hariani.
Investment options
Physical gold remains an option, but mutual funds offer a more convenient way to gain exposure to gold.
"Gold ETFs provide a convenient and efficient way to invest in gold without having to handle physical bullion," says Satish Dondapati, fund manager, Kotak Mahindra Asset Management Company.
"Investors without trading and demat accounts can consider gold funds, which invest in gold ETFs and offer similar benefits," adds Dondapati.
Multi-asset funds, which allocate investments across stocks, bonds, and commodities while rebalancing regularly, also offer a viable option for exposure to gold.
Recommended allocation
Experts suggest a staggered approach to investing in gold after the recent surge.
"Investors should allocate 10 to 15 per cent of their portfolio to gold and silver for diversification," says Lahoti.
Seasoned investors may consider portfolio rebalancing.
"If gold's recent surge has increased its allocation beyond 15 per cent in your portfolio, now may be a good time to rebalance, " says Abhishek Kumar, Sebi-registered investment advisor and founder, SahajMoney.com.
"Additionally, if you need liquidity for short-term goals, booking profits from gold investments could be a prudent decision."
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff.com
