Gold still has the glow, experts say buy on corrections

Mumbai: Investors must continue to treat gold as a key component of their investment portfolios in 2025 as the precious metal will not only provide the benefit of diversification, but is also set to post gains for the fourth consecutive year, said experts.

While gains this year are unlikely to be as sharp as those last year, investors should use corrections in prices as a buying opportunity, they said.

Crossing ₹80,000 per 10 grams to an all-time high in the domestic market, gold prices have gained more than 26% in 2024, fuelled by geopolitical uncertainties, prospects of lower interest rates in the US and buying from global central banks. For this year, the policies and stance in the US after Donald Trump takes charge later this month will be an additional factor to look out for and could underpin gains in gold, apart from factors which drove gains in 2024.

“Gold was doing well the last time Donald Trump came to power in 2016 but saw initial hiccups after he started pursuing his policies,” said Chirag Mehta, chief investment officer at Quantum Mutual Fund. “The uncertainty created after that and the need to diversify away from the dollar led to higher gold prices, and I think it is going to play similarly to what we saw last time,” he said.
He recommends using any correction in gold prices in the short term as an opportunity to buy, and following a staggered approach to accumulate gold over the next few months.

“Changes planned by the new US administration are very aggressive and could be inflationary in nature, and interest rates may need to be reduced to support growth,” Mehta said. “On a real interest rate basis, if inflation is higher and interest rates are falling, it could be a very bullish scenario for gold,” he said.Gold prices gained 14% in 2023 and 12% in 2022, outperforming several asset classes on a three-year basis.”2024 has been a golden year for gold – from the perspective of being a safe haven, as a diversifier of portfolios, and from the perspective of returns from an asset class,” said Sachin Jain, the regional chief executive officer of India for the World Gold Council. While he sees prices remaining range-bound through the year, he maintained that 10-15% of one’s portfolio should be invested in gold.