Gold’s safe-haven role endures, balancing risk across investment cycles

Adding gold to an investment portfolio is a valuable strategy for diversification, acting as a hedge against inflation and market volatility, and serving as a safe haven during economic uncertainty. Experts typically recommend allocating a modest portion, around 5-15 per cent, to gold, depending on individual risk tolerance and financial goals.

There are a plethora of precious metals, but gold is placed in high regard as an investment. Due to some influencing factors such as high liquidity and inflation-beating capacity, gold is one of the most preferred investments in India.

Gold investment can be done in many forms like buying jewelry, coins, bars, gold exchange-traded funds, Gold funds, sovereign gold bond scheme, etc.

Though there are times when markets see a fall in the prices of gold but usually it doesn’t last for long and always makes a strong upturn.

Gold has a key role as a strategic long-term investment and as a mainstay allocation in a well-diversified portfolio. Investors have been able to recognize much of gold’s value over time by maintaining a long-term allocation and taking advantage of its safe-haven status during periods of economic uncertainty.

Gold is a highly liquid asset, which is no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time. It also benefits from diverse sources of demand: as an investment, a reserve asset, gold jewellery, and a technology component. These attributes mean gold can enhance a portfolio in three key ways: Delivering long-term returns; Improving diversification and Providing liquidity

Total consumer demand of gold in India increased to 802.8 tonnes in 2024, which is 26 per cent of the global gold demand taking India at second rank, next just to China with consumer demand of 815.4 tonnes, according to an SBI Research report.

Domestic supply of gold is only a fraction of the total supply of gold in India, with imports contributing around 86 per cent of the total supply in 2024 (the World Gold Council estimate). Gold imports increased around 31 per cent in FY24 and 27 per cent in FY25.

However, higher prices have led to lower demand of gold in 2025. In Q3 2025, consumer demand of gold declined by around 16 per cent year-on-year, driven by reduced jewellery demand.

Gold has always been seen as a safe investment. Adding gold to your multi-asset portfolio helps protect against market volatility, economic downturns, and inflation. Gold helps balance risk and optimize returns in multi-asset portfolios. Its unique features make it a crucial asset in long-term financial planning.

Higher prices have reduced gold imports by 9 per cent to $26.5 billion in the April-September period in FY26, from $29 billion during the same period in FY25.

Another interesting trend visible is the increase in gold reserves by the central banks. The RBI gold reserves rose to 880 tonnes in 2025 as part of strategic reserve management. Return on gold has been comparable to equity market (Sensex) over a 5, 10 and 15-year period; however, it far exceeds market return over 1 year and 3 year period.

Furthermore, the recent discoveries of new gold mines in various districts of Odisha as Deogarh, Keonjhar, Mayurbhanj (with an estimated 1,685 kg of gold ore detected by the GSI) among others, Jabalpur in Madhya Pradesh (estimated quantity could run into lakhs of tonnes) and Kurnool district in Andhra Pradesh (India’s first large private gold mine expected to produce 750 kg of gold annually) could help ease the pressure on imports and are positive for our current account balance.