Gold prices in India surged to unprecedented levels last week, breaching the Rs 1.02 lakh mark on Friday, driven by US President Donald Trump’s tariff policies and a broader global flight to safety. Market experts say the rally reflects deepening concerns over the US dollar’s reliability, inflation risks, and geopolitical tensions.“Uncertainty over the long-term reliability of the US dollar is prompting a global shift towards gold, with central banks actively reallocating reserves as a hedge. Coupled with rising geopolitical tensions, these factors have significantly strengthened gold’s safe-haven appeal,” Rahul Singh, CIO – Equities, Tata Asset Management, told ET.Multiple drivers behind the surgeKaynat Chainwala, AVP – Commodity Research, Kotak Securities, cited a combination of macroeconomic and geopolitical factors. She noted that softness in the US labour market and consumer spending has raised fears of a broader slowdown, while expectations of a dovish Federal Reserve are weighing on the dollar, pushing it below the 98 level and supporting gold.Adding fuel to the rally, reports that the US has imposed tariffs on imports of one-kilo gold bars — the most commonly traded form on COMEX — sparked fears of supply tightness. This pushed COMEX futures more than $100 above spot prices, with prices hitting a record $3,534/oz. On MCX, gold breached Rs 1,02,000 per 10 grams.According to an ET report, October gold futures on MCX closed Friday at Rs 1,02,191 per 10 grams — an all-time high — supported by tariff uncertainty and safe-haven buying from global central banks.Buy, hold, or sell gold?Chainwala believes tariff-driven inflation risks, coupled with signs of a cooling US labour market, have heightened stagflation concerns. With a high probability of a Fed rate cut in September, she sees the gold outlook as bullish and advises a buy-on-dips strategy, with entry levels around $3,350/oz in spot gold and Rs 1,00,500/10 grams on MCX.Singh suggests maintaining gold as a long-term core allocation. With a weakening US dollar and rising geopolitical uncertainty, he says even central banks are diversifying into gold as a hedge against systemic risk. “These should not be treated as short-term bets but as strategic allocations over a 3–5 year horizon,” he said, adding that while tactical changes can be made based on price movements, gold’s fundamental role as a hedge remains.Investment routesInvestors can gain gold exposure through:
- Gold funds: Suitable for portfolio diversification; typically up to 10% of large portfolios can be allocated to gold. For smaller portfolios, advisors suggest skipping them.
- Gold ETFs: Exchange-traded funds that track the price of physical gold, usually backed by one gram per unit. Requires a demat and trading account.
- Physical gold: Traditional option, but less liquid and often incurs making charges.
- Sovereign Gold Bonds: Government-issued, offering interest income along with gold price appreciation.
- Multi-asset funds: Hybrid schemes with at least 10% in three or more asset classes, often including equity, debt, and gold.
Singh recommends gold ETFs for their liquidity and ease, and multi-asset funds for dynamic rebalancing between asset classes with equity taxation benefits, depending on investor tax situations and desired involvement. Chainwala agrees that ETFs and gold-focused multi-asset funds are more convenient and tax-efficient than physical gold.Performance snapshotGold ETFs have delivered an average return of 45.01% over the last year and 31.50% so far in 2025. Multi-asset allocation funds have returned 7.16% in the last year and 5.78% in 2025 to date.Singh expects near-term consolidation for gold within a $3,000–$3,500 per ounce range as markets digest tariff changes, geopolitical risks, and US growth concerns. “Any escalation on the tariff or geopolitical front could boost demand for gold as a safe-haven asset,” he said.Chainwala also sees gold benefiting from tariff uncertainty, inflation concerns, and a weakening dollar. Quant Mutual Fund, in its August outlook, noted that while August is seasonally bullish for gold, prices may have peaked near $3,500/oz and could correct by 12–15% in dollar terms over the next two months.
(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
