Gold has been on a spectacular rally, hitting an all-time high of nearly $3,770 per ounce (September 24, 2025). Over the past year alone, the yellow metal has delivered equity-like returns of close to 50%, far outpacing most other asset classes. The surge has been fuelled by expectations of interest rate cuts, persistent inflation, worries over US fiscal sustainability, geopolitical conflicts, and heavy central bank buying aimed at reducing reliance on the US dollar. But the glitter can also blind. For retail investors, this is a time for measured allocations, not momentum chasing.
Why gold Has Become The Central Banker’s Darling
Notably, gold recently overtook the euro to become the second-largest global reserve asset, accounting for nearly 27% of reserves compared with the euro’s 23%. Central banks now hold around $4.5 trillion in gold, even more than their combined holdings of US Treasuries (about $3.5 trillion). This shift is indicative of a broader trend: nations see gold as a neutral, stable store of value in an increasingly uncertain world. But for individuals, this very enthusiasm should be a reminder that cycles can reverse if central banks change course.
So now the question is – how much should you allocate?
Experts advise gradual accumulation rather than lump-sum bets.
- Beginners: Start with 5–7% of your portfolio.
- Moderate investors: Consider increasing to 10–12%.
- Aggressive risk-takers: Go up to 15–20%, but only if the rest of your portfolio is well-diversified.
Therefore, in essence, gold should complement—not replace—your equity and debt exposure, here are the investment routes for retail investors –
1. Gold ETFs: Listed on exchanges; require a demat account. Low-cost, transparent, and liquid. Example: Nippon India ETF Gold BeES trades at ~₹94 per unit (pegged to 0.01g of gold).
2. Gold FoFs: Invest in gold ETFs, no demat required. Allow SIPs (from ₹100/month) for disciplined investing. Slightly higher costs than ETFs, but convenient.
3. Multi-asset funds: Combine gold with equities, debt, and other assets. Ideal if you prefer the fund manager to handle allocation. Example: WhiteOak Capital Multi Asset Allocation Fund delivered 15.2% returns in the past year with ~13% gold exposure.
4. Sovereign Gold Bonds (SGBs): Offer 2.5% annual interest plus price appreciation, and tax-free maturity gains. Best suited for long-term investors with clarity on holding periods. For beginners, they may feel complex due to premiums and liquidity constraints.
Do’s & Don’ts Of Gold Investing
- Start small: Begin with 5–7% allocation; scale up to 10–12% (max 15–20% for aggressive investors).
- Diversify routes: Use ETFs, FoFs, or multi-asset funds for ease and liquidity.
- Think long term: Use gold as a hedge, not a trading bet.
- Use SIPs: Average out costs and avoid timing mistakes.
- Check costs: Compare expense ratios of ETFs vs. FoFs.
Don’ts
- Don’t invest just because prices hit record highs.
- Don’t treat gold as a replacement for equities and debt.
- Don’t ignore tax rules—SGBs offer tax-free maturity, ETFs/FoFs do not.
- Don’t panic-sell during corrections; gold cycles are volatile but stabilising.
- Don’t forget liquidity, SGBs can be hard to exit midway.
What Lies Ahead
Most fund managers remain bullish on gold in the medium term. The combination of Fed easing, geopolitical risks, and central bank demand could keep prices elevated. Still, experts caution that corrections are inevitable. Over 25 years, gold has returned about 13.9% annually, close to the Sensex’s 12%. But stretch the horizon, and equities take the lead: the Sensex has delivered 14.7% annualised returns over 41 years, while gold delivered 10.3%.
Gold shines brightest when it’s part of a well-balanced portfolio, not the star of the show, that’s the real lesson: gold is not a wealth creator like equities but a stability anchor. Its job is to hedge your portfolio during crises, not replace equities or debt. For retail investors, the smart move is clear, accumulate gold gradually, stick to disciplined allocation, and let it play its role as a steadying force in your financial journey.
