Gold has been a stellar performer, widening the performance gap with India’s Nifty 50 index by a big margin. The yellow metal has gained 30.69% in rupee terms and 39.10% in dollar terms in the last year, while the Nifty50 rose 25.6%. But such a rapid gain has sent financial analysts into a cautioning mode to advise investors not to put in more money in gold. With India’s gold bull run ending? Is it time to rethink gold in your portfolio?
Key Takeaways for Gold Investors
- Outperformance by Gold: Gold has returned more in comparison to major equity indices of late, drawing the attention of investors in times of uncertainty about the global economy.
- Slower Growth Likelihood: The fact that experts warn of a slowing in the current rally of gold should encourage us to avoid over-allocation in this asset.
- Diversified Portfolio: Balanced allocation near 10% towards gold is the need of the hour.
- Global Trends-Central Banks: Gold draws strength from rising geopolitical tensions and purchases by central banks, neither of which is a leading indicator of sustainable growth.
Is It Time to Take Some Profits Off the Table and Reduce Gold Allocations?
Financial planners stress that this stellar recent performance doesn’t make it immune to volatility. Manav Modi, bullion analyst at Motilal Oswal Financial Services, suggests buying gold judiciously, that is, on dips. He forecasts a price target of ₹81,000-86,000 per 10 grams over the next two years. Vineet Nanda, founder of SIFT Capital, termed it an inflation hedge rather than a primary growth asset.
Why a Diversified Approach Matters
Global economic turmoil has driven the rise of gold, but over-reliance on gold leaves investors open to potential risks. With India’s Gold Bull Run Ending? Most advisors would recommend a diversified investment portfolio, with an allocation of 10% to gold, 30-40% to fixed income, and 50-60% to equities. That way, stability is provided, without giving up the possibility of growth in other assets. This new interest in gold is part of a move by central banks to diversify their reserves away from the US dollar, adding another layer of support, although one that is not certain to bring future gains.
Gold is always in demand, particularly during choppy periods, but it may hardly offer an upside from this rally. Investors should not make this an emotional purchase; it is a diversified portfolio with a strategic hedge, not a primary growth driver.
Also, Read: Approach dal-chawal-investing: Edelweiss Mutual Fund CEO Radhika Gupta advice to avoid stock market scams