Gold prices have surged following the US government’s decision to impose new reciprocal tariffs on several major trading partners. The growing risk of a prolonged trade conflict has triggered a global shift, pushing investors towards time-tested investments like gold. Analysts now anticipate that gold could breach the Rs 1 lakh mark, driven by sustained geopolitical tensions and seasonal demand.
In India, gold is an enduring symbol of security and tradition. From weddings to festivals, its cultural significance runs deep. But now, with prices touching record highs, is buying gold a smart decision, or should you wait? That answer to that depends on your financial goals and investment strategy.
Why are gold prices rising?
Gold prices have climbed due to rising trade tensions and global uncertainty. The US has imposed higher tariffs on Chinese imports, pushing investors towards safer assets like gold. A weakening rupee has further driven up domestic gold prices in India.
What should be your gold investment strategy?
- Align your purchase with your investment horizon
Gold is better suited for long-term investing. Rather than making large purchases when prices are high, invest smaller amounts regularly. A systematic gold investment, for example, could be putting Rs 5,000 a month into a Gold ETF, helping average out the cost and reducing the risk of buying at a peak.
Keep gold as part of a broader portfolio
While gold offers safety during uncertain times, it’s not enough to grow your wealth. Over the long term, gold has given 8–10 per cent annual returns, while equities have delivered 12–15 per cent. A balanced portfolio includes gold, stocks, and fixed income. For balance, limit gold to 5–10 per cent and invest across other asset classes based on your risk appetite and long-term goals.
Avoid relying only on physical gold
Physical gold can cost 8–10 per cent higher due to making charges and storage, making your investment significantly costlier. In comparison, Gold ETFs (Exchange Traded Funds) and mutual funds are cheaper and safer alternatives that can also be bought and sold easily, anytime.
While gold is seen as a safe asset, it has its downsides. Its prices can be highly unpredictable, fluctuating with economic news, global tensions, or changes in policy. And since it doesn’t generate income through interest or dividends, your returns depend solely on price appreciation. Gold can help you preserve wealth, but it’s best used as part of a balanced, diversified portfolio.
(The author is the CEO of BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)