Your asset allocation, rather than gold price movements, should dictate your investment calls, say financial advisors. They recommend a 10-15 percent allocation to gold in retail investors’ portfolio.
Continued tariff wars as well as the uncertain global economic and geopolitical scenarios have pushed gold prices to a fresh high – beyond the Rs 95,000-level (June futures contracts) on Multi-Commodity Exchange (MCX) on April 16.
Spot physical gold rates (999 purity), too, were hovering around this mark (Rs 94,579 per 10 gram) in the domestic markets on April 16, as per India Bullion and Jewellers Association (IBJA). The precious metal has also crossed the $3,300-mark in the international market.
The yellow metal’s glittering run over time has been aided by accumulation of gold reserves by central banks across the globe, inflation concerns, and rising demand after the pandemic.
Shine to continue
Goldman Sachs raised its end-2025 gold price forecast to $3,700 per ounce from $3,300, with a projected range of $3,650-$3,950, citing stronger-than-expected demand from central banks and higher exchange-traded fund inflows due to recession risks.
Gold has given stellar returns of 24-25 percent per annum over the last four years. And after US President Donald Trump’s election, it has entered the zone of exuberance. With uncertainty over tariffs persisting along with volatility on the micro and macro fronts globally, gold continues to look very strong,” says Navneet Damani, Head of Research – Commodities, Motilal Oswal Financial Services. Gold tends to shine particularly in times of global market turbulence. “Gold has run up by 40 percent in the last one year and it is likely to continue – we have already exhausted our target for $3,200 for 2025. Whenever there’s uncertainty, gold is the best bet as it is considered a safe haven asset,” he adds.
The reasons behind gold’s spectacular rise have not eased, which means that the outlook for the precious metal’s demand continue to be bright. “Tariff tantrums could lead to a world where high inflation reigns and growth could suffer, resulting in a scenario like stagflation. And gold does really well in such scenarios, which are adverse for risk assets such as equities. The structural factors driving gold are still in place and could become worse. Further policy uncertainties leading to spike in volatility cannot be ruled out,” says Chirag Mehta, Chief Investment Officer (CIO), Quantum Mutual Fund.
Central banks across the world will continue to buy gold, adding to the demand. “The trust that people had on US economy and markets has been affected badly, which could trigger greater reliance on gold here on,” he adds.
Buy, sell or hold?
For retail investors, the focus should be more on their asset allocation compared to asset classes in currency and market fluctuations.
“Our views do not change on the basis of price movements. Gold is important from the asset allocation perspective – it can be around 10 percent of your overall portfolio,” says Harshad Chetanwala, Co-founder, MyWealthGrowth, an investment advisory firm.
Retail investors’ approach towards gold now should revolve around their asset allocation. “If the proportion has increased due to falling equities and rise in gold prices, then you can look at rebalancing. There are plenty of uncertainties still, so there is room to rebalance, though not for outright selling,” says Mehta. “On the other hand, if your allocation is lower, you can look to increase your allocation to gold to 10-15 percent of your portfolio over a period of 6-12 months. Track volatility and increase your allocation by buying on dips.”
If your allocation is lower than 10-15 percent, you can look at adding gold to your portfolio. “Gold is at an all-time high due to the tariff wars and other uncertainties. Some may settle over time. If you want to build allocation in gold can use such opportunities to do so in a gradual manner instead of investing in it immediately. Look at it not from purely returns perspective, but as a portfolio diversifier,” adds Chetanwala.
Source: www.moneycontrol.com
