Gold is glittering again, but experts warn it's a hedge, not a jackpot

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As markets swing between optimism and fear, one asset is quietly outshining the rest — gold. In 2025, the precious metal is scaling new highs, delivering double-digit returns for Indian investors and reaffirming its reputation as a crisis-proof wealth protector. But while the shine is alluring, experts at Tata Mutual Fund caution that gold should be treated as a hedge, not a jackpot.

 

Gold’s historical resilience

 

This is not the first time gold has shone during times of crisis. History shows that whenever global uncertainty spikes, gold prices surge.

 

During the 2008 financial crisis, gold doubled in value between January 2008 and August 2011.

 

In the 2020 Covid-19 pandemic, gold rose by nearly 53% in just eight months, breaching its previous record high.

 

Today, in 2025, gold has hit fresh highs again, echoing the same “flight to safety” seen in past crises.

 

This pattern underlines gold’s reputation as a safe haven asset—a hedge against both financial instability and inflation.

 

What is driving gold prices now?

 

According to a report by Tata Mutual Fund, five key factors are behind the current rally in gold:

 

Central Bank Buying

In the past decade, central banks worldwide have almost doubled their gold holdings. India, too, has steadily added to its reserves. When central banks diversify into gold, it not only boosts demand but also signals long-term confidence in gold as a reserve asset.

 

U.S. Fed Rate Cuts

In September 2025, the U.S. Federal Reserve cut rates by 25 basis points, sparking a gold rally. Expectations of further cuts in October could weaken the U.S. dollar, making gold more attractive globally. Historically, falling interest rates and dollar depreciation go hand in hand with rising gold prices.

 

Geopolitical Risks

From the ongoing Russia–Ukraine war to instability in the Middle East, global conflicts are fueling investor anxiety. When uncertainty rises, money flows into safe assets like gold.

 

Rising Investment Demand

Indian jewelry demand may be softening, but investment demand for gold through ETFs, sovereign gold bonds (SGBs), and digital gold is surging. This marks a shift from gold as a purely ornamental asset to a mainstream investment tool.

 

Rupee Depreciation

Since India imports nearly 86% of its gold, any depreciation in the rupee amplifies local gold prices. For example, while global gold returns have averaged 7.6% over the past 30 years, Indian investors earned around 11% in rupee terms due to currency weakness.

 

What does this mean for your portfolio?

 

Experts at Tata MF suggest that gold should not be seen as a way to “make quick profits” but as a strategic allocation for long-term wealth protection. Typically, financial planners recommend allocating 5–10% of your portfolio to gold.

 

Here’s why:

 

Inflation hedge: Gold has historically protected purchasing power during inflationary phases.

 

Portfolio diversifier: Gold often moves differently from equities and bonds, reducing overall portfolio risk.

 

Crisis protection: In times of war, pandemics, or currency crises, gold tends to outperform most other assets.

 

Is silver worth considering too?

 

Interestingly, analysts are suggesting a 50:50 allocation between gold and silver. Silver has historically shown higher volatility but also stronger returns during industrial demand booms. With clean energy and electric vehicles driving silver demand, it may complement gold’s safe-haven qualities.

 

Risks you should be aware of

 

Like all investments, gold comes with its own risks:

 

No regular income: Unlike stocks or bonds, gold does not pay dividends or interest (except SGBs).

 

Price volatility: While gold is seen as stable, short-term fluctuations can be sharp.

 

Over-allocation risk: Too much gold exposure can drag down portfolio returns in long bull markets for equities.

 

Expert outlook for 2025

 

Market experts expect gold to consolidate in the $3,500–$4,000 per ounce range in the short term as global markets digest U.S. tariff changes, growth concerns, and geopolitical risks. The recommendation is to buy on dips rather than chasing short-term rallies.

 

"We expect Gold prices may consolidate around broad range of $3,500-$4000/oz over the short term, as the world digests US tariff policy changes along with heightened geopolitical risks and elevated US growth concerns. Investors may remain invested and look for accumulation on any decline in the prices triggered by short term cyclical factors.

 

We believe that the overall market environment is going to be favorable for a strategic allocation in Gold as a long- term investment in portfolio considering it’s hedge against inflation, Geo-political uncertainty and currency depreciation. As incremental flows coming to the gold and silver, Investors may consider to allocate Gold and Silver in 50 : 50 ratio as Silver too looks attractive and Gold as a strategic asset," said the report.

 

For Indian investors, with the rupee expected to remain under pressure, the case for gold is even stronger. In fact, many advisors see 2025 as an opportune year to gradually accumulate gold for long-term financial security.

 

Key takeaways for investors

 

Gold remains a strategic hedge, not a speculative bet.

 

Allocate 5–10% of your portfolio to gold through efficient channels like ETFs or SGBs.

 

Diversify with silver if you want to capture industrial demand growth.

 

Use buy-on-dips as your strategy rather than chasing peaks.

 

Remember that gold is most valuable when markets are uncertain—it’s your financial shock absorber.