Gold is climbing again. Is it time to take some profits or stay invested?

Just when analysts expected some cooling off, the yellow metal surprised everyone by heading toward its all-time highs.

Precious metals such as gold and silver are once again on an upswing, driven by safe-haven buying amid the Israel-Iran conflict and weakness in the dollar index.

On Friday, gold and silver settled on a positive note in the international markets. Gold August futures contract closed at $3,452.80 per troy ounce, up 1.48 percent, and silver July futures contract settled at $36.355 per troy ounce, up 0.17 percent.

Domestic markets also saw positive movement. The gold August futures contract settled at Rs 1,00,276 per 10 grams with a gain of 1.91 percent and the silver July futures contract settled at Rs 1,06,493 per kg with a gain of 0.57 percent.

Geopolitical tensions are driving gold and silver prices due to investors' flight-safety instinct. Global equity markets plunged and crude oil prices surged, which also supported prices of precious metals.

“Gold prices closed above $3,450 per troy ounce and could test their previous lifetime high once again in the international markets, and silver prices could also follow gold in the upcoming sessions. Weakness in the rupee could also support prices of gold and silver. We expect gold and silver prices to remain volatile this week amid volatility in the dollar index and geopolitical tensions,” said Manoj Kumar Jain, director of Prithvi Finmart.

Just when analysts expected some cooling off, the yellow metal surprised everyone by heading toward its all-time highs.

Factors driving the rally

After seeing a rally towards the Rs 99,000 mark in April driven by the tariff wars set off by the US, gold prices on the MCX had cooled to Rs 92,000 level in May 2025 on easing tensions. However, things have changed drastically in the last couple of sessions.

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“In uncertain times, particularly war-like situations, gold prices increase and this particular conflict could also have an impact on crude prices and global trade as well. There could be a scenario where gold prices may go up further,” said Harshad Chetanwala, co-founder, MyWealthGrowth.com.

Another factor that is helping gold rally is rate cut expectations from the US Federal Reserve.

“US inflation data has softened. As expectations of interest rate cuts rise, real yields decline—making gold, a non-yielding asset, more attractive. Further, countries like China and India continue to accumulate gold in large quantities,” said Viral Bhatt, founder, Money Mantra.

According to Vivek Banka, co-founder, GoalTeller, gold has recently surpassed the euro to become the second largest held reserve asset globally, indicating significant and continuous buying by central banks along with large investors.

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In short, gold is in demand for both emotional and institutional reasons.

What’s the outlook?

Before the recent flare-up, analysts had begun cautioning about gold’s steep rally. Technical indicators suggested that prices were overheated. Some even forecasted a correction or sideways consolidation.

Now the sentiment has changed in favour of gold again. “In investing, perception often outruns data—and right now, the world perceives risk, and gold is its safe haven,” said Bhatt.

Silver has also broken out technically of multi-year zones and looks poised to have a short-term upward move.

“Trump's failure to contain geopolitical issues and the highly escalated Israel-Iran tensions will continue to put upward pressure on gold prices,” said Banka.

What should investors do?

Overall allocation in gold can be around 10-15 percent depending on the investor's profile. Further, gold has to be looked at from the allocation perspective and not from just a returns-generating perspective.

“We still continue to share that this allocation can be maintained all the time. Another important thing is gold prices have surged over the last couple of years; hence, anyone who wants to invest in gold from a long-term perspective may like to hold on for some time than rush to invest in one go at these prices,” said Chetanwala.

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Banka also suggests that investors who hold gold should continue to stay invested over the next few quarters as it continues to be a great hedge against all these uncertainties. “Incremental exposures can continue in a staggered manner,” he said.

According to Bhatt, most Indian portfolios are dominated by equity and real estate. “If your gold allocation is below 5–10 percent, consider topping it up and use gold mutual funds or ETFs (exchange-traded funds) as they are cost-effective and regulated.”

However, he cautions investors against chasing short-term momentum in gold.

“Entering gold purely because it’s in the news can backfire, as prices may retreat if tensions ease or the US Fed delays cuts. Also, avoid lump-sum investments at all-time highs. The smart strategy at this point would be to go with a staggered approach via SIPs (systematic investment plans),” said Bhatt.