Gold shines bright. Should you buy, hold or sell?

Gold buying this festive season

With annual imports of around 800 tonnes, gold has been a generational store of value and a safe-haven asset in India, sought during both celebrations and crises. Though subject to short-term fluctuations, gold continues to be a hedge against uncertainty.

“Gold has experienced a historic rally this year, delivering a remarkable return of over 40 percent, so far, in 2025. What makes this rally unusual is that it coincides with rally in the equity market, challenging the traditional inverse relationship between stocks and gold,” said Vandana Bharti, head of commodity research at SMC Global Securities.

Gold delivered gains of 12 percent in FY24 and 16 percent in FY23. The Nifty50 has given a year-to-date return of 7 percent in 2025, 9 percent in 2024, and 19 percent in 2023.

The 24-carat gold climbed to around Rs 1,14,300 per 10 grams on September 23, 2025.

A unique mix of forces has driven the surge. Rising geopolitical and tariff tensions, ongoing de-dollarisation, and aggressive central bank buying, she said. Central banks are continuing to accumulate gold even at elevated prices, providing a strong base of institutional demand.

The numbers underscore the trend. Central bank purchases touched a record 1,100 tonnes in 2023, as per the World Gold Council. Since Western sanctions froze Russian assets in Europe, central banks have sought to reduce their dependence on the dollar.

Gold, which can be stored safely within their own borders, offers insulation from such risks. Goldman Sachs Research says since 2022, central bank purchases of gold in the London over-the-counter market have risen fivefold.

Buy, hold, or sell?

The recent rally has left many investors wondering whether it is the right time to enter. Analysts says that in the near term, a minor correction is expected.

“Investors are advised to wait for the correction before going long. The overall bullish sentiment for gold is expected to continue, albeit with less intensity,” Bharti said.

Gold’s long-term case, however, remains solid. Its appeal as a store of value and hedge against inflation, currency debasement, and financial instability ensures its relevance.

The interest rate cycle adds another dimension. The US Federal Reserve recently cut rates by 25 basis points to the 4 percent–4.25 percent range. While the move was aimed at managing a weakening labour market, it has implications for gold.

Lower rates reduce the opportunity cost of holding non-yielding assets such as gold, making them more attractive. At the same time, fresh tariffs and inflationary pressures could further support demand.

“In the long run, this lower-rate environment and potential for rising inflation will likely give gold the upper hand,” Bharti said.

Abhishek Kumar, a SEBI-registered investment adviser, echoed his view. “Gold is expected to remain attractive. The expected weakening of the US dollar from Fed rate cuts would make gold appealing to emerging market investors as a hedge against currency and inflation risks,” Kumar said.

How to invest in gold

For Indian investors, access to gold has become far easier and more transparent. Now apart from physical bars and jewellery there is an alternative to hold digital gold.

Gold ETFs

Gold exchange-traded funds (ETFs) are among the most popular ways to invest. Listed on stock exchanges, they represent units backed by 99.5 percent pure physical gold stored in vaults. This eliminates concerns about storage and purity while ensuring liquidity.

Globally, gold ETFs hold about $294 billion in assets, representing nearly 3,000 tonnes of gold.

Gold mutual funds

For investors without demat accounts, gold mutual funds provide easy access. These funds invest in gold ETFs and are regulated by Sebi, offering the same safety and convenience. For retail investors seeking simplicity, they are an ideal route but they are costlier than ETFs.

Digital gold from fintechs

Some fintech platforms allow investors to buy digital gold for as little as Rs 1. While convenient, this option comes with a major caveat—it is unregulated. Unlike ETFs and mutual funds under Sebi’s oversight, digital gold via wallets lacks clear checks and balances. Experts warn that in case of default, investors may be exposed to significant risks.

How much gold should you own?

While gold is a valuable addition, it should not dominate a portfolio. The consensus among wealth managers is to use it as a diversification tool. Most recommend allocating 5–15 percent of a portfolio to gold, depending on the investor’s risk profile.

Silver is another asset that experts say is good for diversifcation, as it looks undervalued compared to gold.

“Around 5-10 percent of every portfolio should be allocated to gold through gold mutual funds. The position can be built in a staggered manner,” said Rajul Kothari, partner at Capital League, a boutique wealth management firm.

This measured allocation ensures that investors benefit from gold’s safe-haven qualities without compromising growth potential from equities or fixed-income instruments.

Gold’s remarkable 2025 rally reflects not just market dynamics but also deeper shifts in the global financial system. With central banks diversifying reserves, geopolitical tensions rising, and interest rates turning supportive, the metal has reinforced its reputation as the ultimate hedge. For Indian investors, the avenues to invest have expanded significantly, offering regulated, liquid, and convenient options.

The advice for now: wait for the ongoing correction before making fresh allocations but keep gold in your portfolio. As history has shown, when uncertainty rises, gold shines the brightest.