Market experts say that gold should not be seen as a trading opportunity but as a hedge against global inflation and uncertainty and for those whose allocation exceeds 8-10% of the total portfolio should book partial profits.
Also Read | Silver ETFs down up to 28%: Buy the dip or stay away?“Gold surged 53% in 2025, capturing the attention of investors worldwide. However, Gold should not be seen as a trading opportunity but as a hedge against global inflation and uncertainty. Gold should not exceed 8-10% of the overall asset allocation. Those who have invested more than this should consider booking partial profits,” Rajesh Minocha, Certified Financial Planner (CFP) and Founder of Financial Radiance, in an interaction with ETMutualFunds
Another expert believes that having delivered this performance, gold may now constitute a disproportionately large portion of some investment portfolios, the allocation in this metal should not exceed 10-15% and if the allocation exceeds one may think of rebalancing the allocation.
“The long-term outlook for gold remains broadly positive, supported by persistent geopolitical tensions, ongoing central bank purchases, and global economic uncertainty. Gold has historically served as a safe-haven asset during periods of volatility, and its ability to preserve wealth continues to attract investor interest,” Satish Dondapati, Fund Manager, Kotak Mutual Fund told ETMutualFunds.The fund manager at Kotak Mutual Fund further adds that having delivered approximately 53% returns year-to-date, gold may now constitute a disproportionately large portion of some investment portfolios and if it exceeds 20% of your holdings, it may be prudent to trim a portion of your allocation to bring it back within a more balanced range typically 10%–15% depending on your individual risk tolerance, investment objectives, and time horizon as this rebalancing can help maintain diversification, reduce concentration risk, and ensure that your portfolio remains aligned with your long-term financial goals.
Gold down from peak
According to a report by ETMarkets, Gold prices have slipped nearly Rs 12,700 from their all-time high on the Multi Commodity Exchange (MCX), triggering nervousness among investors who were riding the yellow metal’s bullish wave just weeks ago.From an all-time high of Rs 1,32,294 per 10 grams, gold has now corrected 9.6% to hover near Rs 1,19,605, a decline of Rs 12,700, leaving many wondering whether this is the beginning of a deeper fall or a long-term buying opportunity, the report added.
Why are gold ETFs falling?
As the metal has seen a recent dip, is this a healthy correction or an early sign of exhaustion in the rally and should new investors enter now or wait?
With gold reaching an all-time high level of $4,356 per ounce last week and witnessing some retracement as investors engaged in profit-taking following an extended rally of nearly 25% within two months, the decline appears to reflect short-term volatility rather than a fundamental reversal in trend, Satish Dondapati said.
The near term outlook is likely to remain volatile due to uncertainty surrounding global trade policies and uncertainty over the U.S. shutdown, he recommends that investors must exercise caution in making large lump-sum allocations to gold at current levels instead, a phased investment approach through SIPs or STPs in gold ETFs or gold mutual funds is recommended, aligned with individual risk tolerance and asset allocation frameworks.
Also Read | Explained: What Sebi’s new TER rules mean for mutual fund investorsHaving a similar long term view, Minocha believes that slow SIPs in gold ETFs or gold funds can help new investors gradually enter the market and as attempting to time the market can be risky, so exposure to gold and other commodities could be considered through multi-asset mutual funds.
The fall hasn’t been isolated to global markets. Domestic gold futures have also been under pressure. On Tuesday, the MCX December contract settled at Rs 1,19,646 per 10 grams, down 1.08%. Gold briefly dropped to Rs 1,18,450 during the session before recovering partially, the ETMarkets report added.
Gold ETF analysis
According to data from ACE MF, gold ETFs on an average have lost 6.21% in the last two weeks with Aditya Birla SL Gold ETF and Nippon India ETF Gold BeES losing the most of around 6.38% in the same period. Tata Gold ETF lost the lowest of around 5.51% in the last two weeks.
Looking at the recent performance and the dip, should investors use the dip to accumulate more gold ETFs, or wait for more clarity on global rates and inflation trends?
In response to this, Minocha recommends investors with a five-year horizon can build positions gradually by using price dips, while keeping gold allocation within 8% to 10% and gold continues to serve as a diversification tool amid interest rate uncertainty and predicting global macro trends is challenging.
On the other hand, the fund manager at Kotak Mutual Fund recommends that given the current levels, investors should approach gold with caution rather than making large lump-sum allocations and a more prudent strategy is a phased investment approach through SIPs or STPs in gold ETFs or gold mutual funds as per individual risk tolerance and aligned with overall portfolio allocation objectives.
Multi asset allocation funds are hybrid funds that need to invest a minimum of 10% in at least 3 asset classes. These funds typically have a combination of equity, debt, and gold. Some schemes also add international equities, InvITs and REITs.
But with gold and silver rallying and offering good returns, many investors are willing to invest separately in equity, debt, and gold funds against multi-asset allocation funds.
SGBs offer the dual benefit of gold price appreciation and a fixed annual interest rate, paid semi-annually. While investors can hold them till maturity to enjoy long-term tax-free gains, some can also prefer to redeem early to meet liquidity needs. The Reserve Bank of India (RBI) has recently announced the premature redemption price for Sovereign Gold Bond (SGB) 2020-21 Series-I Issue date October 28, 2020, according to a report by ETWealth.
Also Read | 6 equity mutual funds multiply investors’ SIP investments by over 1.80x in 5 years
After the recent dip, can sovereign gold bonds or multi asset allocation funds be a better alternative now to have exposure in gold?
During periods of market volatility, it is advisable to continue investing in a staggered or phased manner, rather than making large lump-sum investments as this approach—through systematic investment plans (SIPs) or systematic transfer plans (STPs)—helps average out the cost of investments and reduces the impact of short-term market fluctuations and alternatively, investors may also choose to wait until prices stabilize before making additional allocations, Satish Dondapati recommends.
“Multi-asset funds can be an effective way to gain exposure to precious metals such as gold and silver. These funds are actively managed, allowing the fund manager to dynamically adjust the allocation to precious metals based on market conditions and outlook. This professional management helps investors benefit from potential upside in commodities while maintaining diversification across other asset classes like equities and debt, thereby reducing overall portfolio risk,” the fund manager further adds.
Echoing a similar opinion, Minocha says profit-taking can be done by short-term investors who had previously taken a much larger exposure and for taking on lower volatility, multi-asset funds with gold exposure are more appropriate. “It is unlikely that Sovereign Gold Bonds will be issued in the future, which would have been a good option, though liquidity is an issue in SGBs,” he added.
One should always invest based on their risk appetite, investment horizon, and goals.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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