Gold scales new peak; existing investors should book partial profits

New ones should stagger purchases to avoid timing risk

Amid escalating trade tensions and a weakening rupee, gold hit a record ₹1,03,420 per 10 grams in Delhi on August 8, 2025. While existing investors should book partial profits to restore gold allocation to its original level, new investors should enter gradually.

 

Why gold surged 

Sustained buying by central banks remains the key structural driver. “Central banks purchased 290 tonnes in the first half of 2025, absorbing nearly 15 per cent of the total supply from mines globally,” says Riya Singh, research analyst, commodities and currency, Emkay Global Financial Services. Heightened geopolitical uncertainty over the past two years has also played a part. 

Among recent events, tariff-related tussles have raised uncertainty. “Recent US tariff announcements briefly drove international prices to record highs of about $3,534 an ounce,” says Puja Singh, chief executive officer (CEO), Manipal Fintech.

 

Even as prices rose internationally, the rupee’s depreciation to 87.8 against the US dollar made gold imports more expensive.

 

Revised US labour market data, which erased 258,000 jobs, increased the odds of the US Federal Reserve cutting rates in September. Lower bond yields are positive for a non-interest-yielding instrument like gold.

 

Increasingly, households in financial distress opt for gold loans instead of selling their jewellery, reducing supply in the secondary market.

 

Rally expected to sustain 

Experts believe gold prices may remain on an upward trajectory. “Sustained central bank buying, continued softness of the rupee due to a strong US dollar, and evolving trade dynamics could contribute to upside,” says Riya Singh. She expects investment-led demand to be the dominant price driver.

 

If the weakness in US labour data sustains, it could propel the Federal Reserve to cut rates. “This would depress real yields and support gold’s march towards $3,500–3,600 per ounce,” adds Riya Singh.

 

“US economic growth will increasingly turn tepid and put pressure on the dollar index,” says Sandeep Raichura, chief executive officer of retail broking and distribution and director, PL Capital.

 

A slowdown in global growth and a shift towards more accommodative policies by central banks would also support prices. “Safe-haven buying looks set to continue amid US tariff uncertainty, slowdown concerns, and possible increase in geopolitical risks,” says Trivesh D, chief operating officer, Tradejini. 

 

Puja Singh expects seasonal factors like festivals and weddings to support regular demand.

 

Potential headwinds 

Some developments could hinder gold’s rally. “If inflation proves persistent or US growth surprises on the upside, it could lead to a reversal of expectations that the Federal Reserve will ease interest rates,” says Riya Singh. A stronger dollar would also impede the rally.

 

Trivesh adds that easing trade tensions and stabilisation of currencies could cool demand.

 

According to Puja Singh, elevated price levels might lead to some buyers deferring jewellery purchases, affecting retail demand. Favourable equity market conditions could shift investment flows towards equities and away from gold. Profit-taking by investors could also slow the pace of the rally.

 

Rebalance portfolio 

Existing investors should review their asset allocation rather than react to price levels. “If, due to recent gains, the allocation to gold has gone beyond the target level, rebalance your portfolio,” says Mayank Bhatnagar, co-founder and chief operating officer, FinEdge.

 

The gains from gold should be reinvested in portions of the portfolio where the investor is underweight. “Do not exit gold completely. Maintain an allocation of 8–12 per cent, as its role as a shield against inflation, currency weakness, and market shocks remains invaluable,” says Charu Pahuja, group director and chief operating officer, Wise Finserv.

 

The long-term trend of de-dollarisation is expected to support gold. “Increasingly, gold will become a permanent feature of portfolios,” says Raichura.

 

Investors may also consider increasing exposure to silver exchange-traded funds (ETFs). “There is a global supply deficit of silver. Gold is at new highs. Investors can go for the relative safety of silver, which is both an industrial and a precious metal that can offer capital gains and diversification benefits,” says Raichura. 

 

Stagger purchases 

New investors should not wait for a correction or a perfect price to enter gold. Instead, they should accumulate it in a staggered manner by investing regularly in gold ETFs or through a systematic investment plan (SIP) in gold mutual funds. “This can average out costs and reduce timing risk,” says Bhatnagar. A long horizon is essential.

 

Investors may use ETFs for liquidity and transparency and sovereign gold bonds (SGBs) for long-term holding. “You get 2.5 per cent annual interest and pay no capital gains tax if held to maturity,” says Pahuja. These will have to be purchased from the secondary market as the government has paused the issuance of fresh tranches.