Why Now Is a Good Time to Invest in Gold — And Why It Can Beat Equity in Today’s Climate
For regular Indian investors, 2025’s mix of geopolitics, interest-rate shifts, and currency moves has pushed gold to centre stage. Below is an in-depth, plain-English guide on why gold deserves a meaningful slice of your portfolio right now, how it compares to equities in the current scenario, and the best ways to invest—SGBs, ETFs, funds, digital and physical gold.
1) Geopolitics: Why Uncertainty Lifts Gold
Ongoing tensions—from Eastern Europe to the Middle East—plus trade and tech frictions among major powers keep global risk elevated. In such periods, investors worldwide gravitate toward safe-haven assets. Gold, being nobody’s liability and universally accepted, historically benefits from this “flight to safety.” Even at home, concerns around inflation spikes, oil price swings, and fiscal pressures can add volatility to equities. Gold tends to soften the blow when headlines turn stormy.
2) Gold’s Crisis Record: How It Behaves When Markets Panic
Across episodes like the global financial crisis and the 2020 pandemic shock, gold either held value or rose while equities fell. That pattern repeated in more recent risk-off bouts too. The reason is simple: gold is a store of value not tied to earnings, credit quality, or a single economy’s fortunes. When financial conditions tighten or confidence wobbles, gold’s defensive character comes through.
What supports gold in crises?
- It has no default risk (not a company’s or government’s IOU).
- Low or negative correlation to equities during stress.
- Central bank demand as reserves diversification.
- High global liquidity and recognisability.
Portfolio impact
- Acts as an effective hedge when stocks correct.
- Helps lower overall volatility and drawdowns.
- Improves the portfolio’s risk/return balance.
3) Gold vs Equity Today: Risk, Return & Reality
Indian equities remain a powerful long-term wealth creator, but they are sensitive to earnings, valuations, and foreign flows. After an extended run, markets can pause or correct as rates, profits, and geopolitics evolve. By contrast, gold’s recent performance has been buoyed by safe-haven demand, central bank buying, and currency effects. The two assets zig and zag at different times—exactly the diversification you want.
| Factor | Gold | Equity |
|---|---|---|
| Primary driver | Safe-haven demand, real rates, USD/INR, central bank buying | Earnings growth, valuations, liquidity, domestic & FII flows |
| Behaviour in stress | Often holds up or rises when risk assets fall | Typically corrects; can be volatile during uncertainty |
| Correlation with stocks | Low, can turn negative in crises (good hedge) | High (moves with economy, profits, and rates) |
| Income/yield | No cash flow (exception: SGB interest) | Dividends (vary by company/sector) |
| Use-case in portfolio | Risk hedge, stabiliser, currency & inflation shield | Core long-term growth engine |
4) Macro Mechanics: Inflation, Interest Rates & Currency
Three macro levers have outsized influence on gold right now:
When real (inflation-adjusted) rates decline—either because inflation stays firm or central banks ease— gold typically finds a tailwind. For Indian savers, rupee depreciation adds another layer: even flat USD gold can translate to rising INR gold over time.
5) How Much Gold Should a Regular Investor Hold?
For most retail portfolios, a 5–15% allocation to gold works well, tilting higher when risks feel elevated. You don’t need to time it perfectly—use a systematic plan to average in and rebalance annually. The goal is ballast, not replacing equity altogether.
6) Best Ways to Invest in Gold (India)
Sovereign Gold Bonds (SGBs)
- What: RBI bonds linked to gold price; 8-year maturity (exit from year 5).
- Perk: 2.5% p.a. interest (taxable) + gold price return.
- Tax: Capital gains tax-free on redemption at maturity for individuals.
- Best for: Long-term core gold allocation; no storage hassles.
Gold ETFs
- What: Exchange-traded units backed by 99.5%+ purity gold.
- Pros: Liquidity, transparent pricing, small expense ratio.
- Needs: Demat + trading account.
- Best for: Liquidity and tactical rebalancing.
Gold Mutual Funds
- What: Fund-of-funds investing in gold ETFs.
- Pros: No demat needed; SIP-friendly.
- Note: Slightly higher total expense than holding ETF directly.
- Best for: MF investors who prefer the mutual-fund route.
Digital Gold
- What: Fractional online gold, backed by vaulted bullion.
- Pros: Micro-purchases; easy accumulation; doorstep conversion possible.
- Caution: Not SEBI/RBI-regulated; check provider credibility and charges.
- Best for: Small, short-term accumulation or later conversion to coins/bars.
Physical Gold (Coins/Bars/Jewellery)
- Pros: Tangible; culturally preferred; instant liquidity via jewellers.
- Cons: Making charges/premiums; storage & insurance; purity checks.
- Best for: Jewellery goals or legacy holdings; not the most efficient “investment”.
Quick Allocation Ideas
- Core (long-term): SGBs via primary issues.
- Liquid sleeve: Gold ETF for rebalancing.
- SIP approach: Use monthly SIPs in ETF or gold fund to average cost.
7) Action Plan: How to Add Gold Now—Without Regret
- Fix your target weight: Pick a band (e.g., 10–12%).
- Stagger entries: Split purchases over weeks (or monthly SIPs) to reduce timing risk.
- Blend vehicles: SGBs for core + ETF for flexibility.
- Rebalance annually: If gold surges above your band, trim; if it lags, top up.
- Stay purpose-led: Gold = hedge & stabiliser; equity = growth engine.
Bottom Line
With geopolitics tense, real rates near a turning point, and INR dynamics in focus, gold’s case is strong. It won’t replace equities—but in today’s environment, it can out-deliver on risk-adjusted terms by cushioning drawdowns and diversifying your return stream. For regular investors, a sensible gold sleeve, built systematically via SGBs and ETFs, is a practical way to protect purchasing power and sleep better through global thunderstorms.
https://investopedia.org.in/investing-in-gold-and-silver/