The remarkable wealth creation comes at a time when gold is shattering records both globally and domestically. Gold has broken records, crossing Rs 1.22 lakh per 10 grams in India in the futures market, while silver rose above Rs 1.5 lakh per kg. In global markets, gold is trading above $4,000 an ounce, supporting the narrative that investors are rushing to safe havens amid inflation, geopolitical turmoil and stock volatility.
The billionaire’s approval
Gold’s historic run above $4,000 an ounce this week has found the biggest support yet, with US billionaire Ray Dalio insisting the yellow metal should make up around 15% of an investor’s portfolio. He called it an “excellent diversification” at a time when most assets remain “so credit dependent.” “Gold is a very excellent portfolio diversifier,” Dalio told Bloomberg. From a strategic asset allocation perspective, “you would probably have something like the optimal mix, about 15% of your portfolio in gold, because if you didn’t even have a tactical strategy, it’s the one asset that does very well when the typical parts of your portfolio fall in value.”
He noted that equities and other conventional investments remain heavily dependent on credit, making gold an effective hedge. The billionaire investor also warned against so-called “dead assets,” noting: “I don’t necessarily like dead assets, not just government bonds, but also if you’re looking at, let’s say, credit or private credit and you look at where the credit spreads are, the credit spreads are very, very low.”
Also read | Gold shatters all records and surpasses Rs 1.22 lakh/10 gram. Should you buy more or book a profit?
The numbers tell the story
Launched in July 2007, it now rides nearly Rs 24,000 crore of investor money on Gold BeES. In the last year alone it is up over 56%, but since inception it is up 950% growing at a healthy CAGR of 13.5% over 18 years.
The performance reflects just a few milestone moments in history. For gold, such impressive returns are reminiscent of the dot-com crash, the 2008 financial crisis and the Covid-19 shock of 2020 – all moments when investors sought refuge from risk and fled en masse to safe havens.
Gold exchange-traded funds in India recorded their largest ever monthly inflows in September, taking total assets under management to a record $10 billion, as investors turned to the precious metal amid subdued stock market returns.
Indian gold ETFs have attracted record inflows of $2.18 billion so far this year, surpassing all previous annual figures. By comparison, inflows were $1.28 billion in 2024, $295.3 million in 2023, and just $26.8 million in 2022.
The local gold price has witnessed a 60% increase this year after witnessing a 21% increase last year. On Wednesday, the local gold price peaked at Rs 1.22 lakh per 10 grams.
The de-dollarization trade
A key factor behind gold’s rise is increasing dedollarization, as gold typically rises when the dollar falls. As of the first quarter of 2025, the USD’s share of Central Bank reserves is around 43%, as major US adversaries such as China (6.8% of gold in reserves) and Russia (37.1% of gold in reserves) accelerated their gold purchases. Russia, which bought 274 tonnes in 2018, financed the purchase by selling almost all of its portfolio of US government bonds.
Central banks around the world buying gold have almost doubled in the past decade. The purchases by central banks, especially from China, and their renewed potential as a reserve provide a structural basis.
Gold’s strength was supported by geopolitical uncertainty, continued central bank buying, expectations of further Fed rate cuts and questions about Fed independence, reinforcing gold’s role as a safe haven and diversifier of core reserves.
The US government shutdown, now in its second week, has delayed key economic data, complicating assessments of the country’s economic health. Despite this uncertainty, traders are pricing in rate cuts of 25 basis points in October and December.
Tata Mutual Fund advises investors to stay invested and look for accumulation of price declines due to short-term cyclical factors. “We believe that the overall market environment will favor a strategic allocation to gold as a long-term portfolio investment given its hedge against inflation, geopolitical uncertainty and currency devaluation.”
The fund house recommends that as flows into gold and silver increase, investors can consider allocating gold and silver in a 50:50 ratio as silver also looks attractive and gold is a strategic asset.
About 86% of gold is imported into India despite high import duties. When the INR falls against the USD, gold becomes more expensive domestically, strengthening local demand, which promotes a rise in gold prices.
This metals rally underlines the deep structural uncertainty – a loud call for cautious allocations in the coming months. Silver has recently overtaken gold, adding a new dimension to the precious metals story.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of the Economic Times)
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