Gold prices at record high: Look for price dips for accumulation, stagger investments

Gold has yielded 27% return in last year.

Gold prices have continued their strong run in 2025, touching  all-time highs and are now hovering around Rs 85,000 per 10 gm in Indian markets. Given the weakness in equity markets, should you be increasing allocation to gold or booking profits?

In the calendar year 2024, gold yielded a return of around 27 percent. This upward trend continued into the first month of the calendar year 2025, with gold prices surging around 7 percent month-on-month.

“As the new year commenced, gold maintained its upward trajectory buoyed by uncertainty from the Trump regime with respect to economic and geopolitical developments necessitating  an effective diversifier, ultimately breaking its all-time high and settling around $2,800 by the end of January,” said Chirag Mehta, Chief Investment Officer – Quantum Mutual Fund.

Gold outlook

According to experts, the current surge in gold is largely on the back of tariffs, economic and geopolitical uncertainty and may remain well supported in the short term on account of uncertainties.

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However, if US President Donald Trump’s posturing subsides or does not lead to an economic upheaval, the surge in gold prices may subside.

“While it’s difficult to predict Trump’s policies and its impact with a lot of moving parts, gold may largely remain well supported albeit with heightened volatility going forward,” said Mehta.

Apurva Sheth, Head of Market Perspectives and Research at Samco Securities also has been bullish on gold from almost a year ago.

"The situation hasn’t changed much on this front post Trump taking up the US presidency. His rhetoric on tariffs has converted into actions and has added more fear factor into the system making the environment conducive for the precious metals to rise further. If inflation rises because of tariff wars, then gold will act as a hedge," said Sheth.

Another factor working in favour is interest rate cuts in the US. Gold generally gives positive returns after the US rate cut cycle starts. The average one-, two- and three-year returns in the last three rate cut cycles since 2000 are 27 percent, 43.3 percent and 64.4 percent, respectively.

Further, global central banks are also relentless in buying. Recently, the demand for gold has increased because of money flowing into exchange-traded funds (ETFs).

Global gold ETFs kicked off 2025 with positive flows, led by Europe, while North America saw outflows. According to a World Gold Council report, following the second consecutive monthly inflow and supported by a higher gold price, global gold ETFs’ total assets under management (AUM) rose to $294 billion and holdings bounced to 3,523 tonnes in January.

Maintain allocation

Amid equity market weakness, gold has been proving its mettle as a safe haven in uncertain times.

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“We believe that strength in gold will continue but investors should look for price dips for accumulation as we may witness some consolidation, or do staggered investments. We see investment in Gold as a good diversification medium and a key in any investor’s portfolio," said Siddharth Srivastava, Head - ETF Product and Fund Manager, Mirae Asset Investment Managers (India).

Sumit Chanda, Chief Executive Officer and Founder, of Jarvis Invest, suggests that investors can invest in gold on dips for a longer horizon.

“SIP into gold ETFs or a periodic buying of Sovereign Gold Bonds (secondary markets) are good and relatively safer ways to accumulate gold. That said, investors should keep in mind that the asset allocation of the overall portfolio. Gold is a hedge and thus should not be more than 15-20 percent of the portfolio," Chanda said.

How gold is placed versus silver?

While gold has yielded 27.10 percent returns in last year, silver is up 28.11 percent during the same period. This has prompted some mutual fund investors to take exposure to silver ETFs.

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The rise in industrial demand for silver has played a key role in its prices to rise. Against this, gold plays an important role in the international monetary system and financial institutions like central banks, institutional investors and insurance companies take exposure to gold as hedge to protect their portfolios against currently prevailing uncertain situations.

“Silver is considered a poor cousin of gold and poor people’s gold. It does not have the strong quality of store value possessed by gold. The Gold-to-Silver ratio has trended between 125 and 65 in the last decade. Currently, this ratio is placed just above 90. Gold is priced slightly more expensive compared to silver right now. However, we believe that gold still has room to outsmart silver,” said Samco Securities’ Sheth.

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