As global markets navigate uncertainty, gold has reaffirmed its timeless appeal for Indian investors in 2025. The precious metal, traditionally a refuge during turbulent times, has delivered impressive gains, with gold exchange-traded funds (ETFs) posting returns exceeding 70% as of 22 December 2025. This performance underscores its role as a crucial portfolio stabilizer against currency weakness, geopolitical tensions, and equity market volatility.
Macroeconomic Tailwinds Support Long-Term Bull Run
The foundations for a sustained upward trend in gold remain strong, according to market analysts. Chirag Mehta, Chief Investment Officer at Quantum Mutual Fund, points to a macroeconomic backdrop that continues to favor the asset. A potential slowdown in the US economy, signaled by labor market data, could pressure the US Federal Reserve to ease monetary policy. If this shift occurs alongside persistent inflationary pressures, the resulting environment of lower real interest rates and policy uncertainty would be highly supportive for gold prices.
Manav Modi, an analyst for precious metal research at Motilal Oswal Financial Services, echoes this optimistic medium-to-long-term view. He anticipates gold to perform well for a sustained period, with any corrections seen as healthy pauses before the next rally phase. Structural factors are also at play, including record levels of US public debt and central banks globally diversifying reserves away from fiat currencies, with gold being a primary beneficiary.
Navigating Short-Term Volatility and Risks
Despite the bullish long-term narrative, experts advise caution in the near term. Tata Mutual Fund, in a December note, highlighted that gold prices may consolidate within a firm range, facing volatility due to speculation around Fed rate decisions, upcoming US economic data releases, and year-end portfolio adjustments. Strong US economic data and successful trade deals were cited as temporary downside risks.
Devina Mehra, Chairperson and Founder of First Global, offered a crucial perspective on risk. She cautioned investors not to mistake gold for a low-volatility asset. Historically, in dollar terms, gold has experienced significant volatility, deep drawdowns after rallies, and prolonged recovery periods. She also noted that a substantial portion of gold's strong returns in rupee terms is attributable to the Indian currency's depreciation rather than absolute price stability, emphasizing its role as a hedge against domestic currency erosion.
Strategic Allocation for Indian Portfolios
For Indian investors, the case for gold is strengthened by unique local dynamics. A weakening rupee magnifies returns from dollar-denominated gold, offering a dual hedge against global uncertainty and domestic inflation. Steady physical demand from India and China, coupled with consistent central bank purchases, provides a durable floor for prices.
On the question of investment strategy, experts recommend a measured approach. Chirag Mehta suggests a typical allocation of around 15% of a portfolio to gold. For those who are under-allocated or just beginning their investment journey, building exposure through systematic investment plans (SIPs) or in a staggered manner is advised to mitigate timing risks. The consensus is clear: while gold is an essential component for diversification and insurance, it must be approached with an understanding of its cyclical nature and inherent volatility.
