Planning to buy gold this Dhanteras? Experts advise caution amid volatility

Restore your target allocation to gold, maintain realistic return expectations, and be prepared for near-term volatility

Richa Angik, a Jamshedpur-based dentist, invests regularly in gold. This Dhanteras, however, she is unsure about whether to add to her holdings owing to gold’s performance. After returning 74.9 per cent in 2025, the yellow metal has delivered a subdued 8.2 per cent year to date. From a peak of ₹1,74,638 per 10 grams on January 29, 2026, it closed at ₹1,43,552 on November 5, 2026 (Thursday), down 17.8 per cent. 

Why gold lost momentum 

After last year’s exceptional run, investors have booked profits and unwound speculative positions. Gold prices have consolidated and also been very volatile. 

The United States (US)-Israel war against Iran drove crude oil from around $60 to $110 per barrel. As oil became costlier, investors worried that inflation would rise and interest rates would stay higher for longer. “The inflationary consequences of higher energy prices have, at times, outweighed geopolitical safe-haven demand,” says Vikram Dhawan, head of commodities and fund manager, Nippon India Mutual Fund. 

Investors began to expect rate hikes. “This pushed bond yields higher, reducing gold’s appeal as a non-yielding asset,” says Deveya Gaglani, senior research analyst – commodities, Axis Direct. 

Those concerns also strengthened the dollar, a development that weighed on gold prices. “Moderation in central bank purchases and intermittent exchange-traded fund (ETF) outflows have added to the pressure,” says Dhawan. 

 

What could lift prices 

The case for investing in gold for the long term has not disappeared. Government debts have ballooned, and concerns persist about whether their fiscal situation is sustainable. “Deterioration in global growth, diversification through central bank buying, de-dollarisation, and debasement risk arising from US fiscal concerns are expected to continue providing structural support,” says Tapan Patel, fund manager – commodities, Tata Asset Management. 

Central banks have moved some of their reserves away from the dollar due to fear that financial sanctions could leave their overseas assets frozen. “Annual central bank purchases of around 1,000 tonnes in recent years have provided structural support,” says Gaglani. 

Politics could help gold regain ground over the next six to 12 months. After the Democrats swept both legislative houses in the midterms, Donald Trump may find it harder to dictate policy. That could help bring the US-Iran conflict to an end. A lasting ceasefire would ease fears about oil supplies, cool inflation and reduce the need for further rate hikes. “If inflation moderates and the Fed begins cutting rates in 2027, declining yields and a weaker dollar would benefit gold,” says Gaglani. 

For Indian investors, the rupee also matters. Over the longer term, it has generally lost around three to four per cent against the dollar each year. When the rupee weakens, it tends to lift gold prices in India. 

Expect a bumpy ride 

Experts believe that while expectations regarding gold have got repriced, the long-term case for investing in it has not reversed. In the near term, however, supply constraints and higher energy prices could keep inflation high, delay rate cuts and make it harder for gold to gain ground. 

“Volatility is likely to remain elevated over the next six to 12 months,” says Dhawan. Investors should prepare for intermittent price corrections.  

If inflation cools faster than anticipated, the Federal Reserve (Fed) may begin cutting rates in the second half of 2027, which would support gold. 

What gold does for a portfolio 

Gold serves as a portfolio diversifier. “Its historically low or negative correlation with equities helps reduce overall portfolio volatility,” says Abhishek Kumar, Securities and Exchange Board of India (Sebi)-registered investment adviser and founder, SahajMoney.com. Investors find it easier to stay invested in a portfolio that declines less. 

“War-like situations, trade wars, pandemics and changing weather patterns highlight the benefit of allocating to gold for protection against broader risks,” says Patel. Gold also protects investors against inflation. 

It also protects them when the currency weakens. “A weaker rupee lifts the rupee value of gold even when dollar prices are flat, helping protect purchasing power over time,” says Harsha Vardhana VM, founder-group chief executive officer (CEO), Atom Financial Services. 

Gold carries no credit or default risk. Investors can also sell it quickly when they need cash. 

Central banks continue to buy gold consistently. “Such steady, price-insensitive buying gives the market a floor,” says Vardhana. 

Know what gold cannot do 

Gold pays no dividends, interest or rent. Investors earn a return only when its price rises. “When bonds and deposits offer decent real yields, every rupee in gold carries an opportunity cost,” says Vardhana. 

Prices can swing sharply over short periods as demand and supply change. “Gold’s returns are also lumpy, with long flat periods followed by strong years,” says Vardhana.  

Gold can also lag growth assets for extended periods. “Its role is to hold value and cushion shocks rather than serve as a growth engine,” says Vardhana. 

How much do you hold? 

Existing investors should see this year’s tepid return as a pause after last year’s blockbuster gains. They should not expect last year’s performance to get replicated. “A realistic long-run return expectation for gold in rupee terms is closer to high single digits or low double digits annually,” says Vardhana. 

Keep the long term in view rather than react impulsively when returns slow down. “Existing investors should view gold from an asset allocation perspective rather than focus on recent returns,” says Kumar. Selling after a fall turns a temporary loss into a permanent one. 

Check how much of the overall portfolio gold now accounts for. “Use this phase to rebalance to your original target allocation instead of chasing past gains or getting disappointed and exiting,” says Kumar. 

Buy gradually, give it time 

New investors should limit gold to five to 10 per cent of their total portfolio. Put in more, and an asset meant to steady the portfolio becomes a concentrated bet. “Maintain a horizon of at least 5–10 years to smooth out price swings,” says Kumar. 

Avoid investing a lump sum immediately after a major rally. Spread purchases through a monthly systematic investment plan (SIP) in a gold fund or ETF instead. Gold ETFs and gold funds cost little, are easy to sell and spare investors concerns about purity. Keep jewellery separate from investments: Making charges and deductions on resale can heavily erode returns.