Gold rates in India have soared sharply year-to-date, with LBMA gold price climbing more than 24%. The gold rally trend has continued since 2024, despite the mild volatility in mid-May, outperforming benchmarks like Nifty 50. Joining the precious metal uptrend, gold ETFs and gold mutual funds also recorded a significant jump. As an investment strategy, experts believe a portfolio mix should include horizon and risk tolerance.
The price of 10 grams of 24 carat gold is Rs 98,080, while the prices are Rs 89,900 in 22 carat and Rs 73,560 in 18 carats. YTD, the gold prices in retail jumps have climbed nearly 26%.
Meanwhile, MCX gold price stood at Rs 96,400 per 10 grams. Last month, gold prices touched their all-time high of Rs 99358 per 10 grams.
Recent Gold Rally and Volatility:
Gold prices have surged sharply in 2025. World Gold Council data show the LBMA gold price up ~24% YTD in USD, with Indian gold around Rs 93,000/10g by mid-May. The chart below illustrates gold's steep climb from January-Apr and the slight pullback (5-8%) in May. The rally was driven by a weaker USD, Fed policy uncertainty and geopolitical tensions. Please note "high volatility" in gold: e.g. after a gap-up above Rs 99,000/10g, prices oscillated amid Fed rate debates. Profits were booked in March, causing the first net gold-ETF outflow in a year (≈₹-77cr), but inflows resumed in April (₹150cr) as investors chased performance, as per Gaurav Garg, Lemonn Markets Desk data.
Nifty Performance:
In contrast, as per the expert's note. India's equities have seen steadier gains. The Nifty 50 rose only ~9-12% in 2024 and has extended modest gains in early 2025 (Nifty ~24.7k on May 14). Equities are supported by benign inflation and easing monetary policy: CPI inflation fell to ~3.2% in April (below the 4% target), giving RBI room to cut rates twice (to 6.00% in Apr 2025). Those cuts - injecting ~Rs 6-7 trillion liquidity into banks - bolster corporate earnings and credit growth, which in turn lift stock prices. Other tailwinds include recovering capex, positive 4Q results, and returning FII inflows (May saw ~$1.4bn in).
Nifty 50 is currently at 24,853.15. YTD, Nifty zoomed by 1,110.25 points or 4.68%.
Gold ETFs Performance:
Additionally, the expert data highlighted that in the past year, gold ETFs dramatically outperformed Nifty. Gold mutual funds averaged ~24-25% returns (1 yr) vs only ~9% for large-cap equity funds. By contrast, over 5 years large caps have out-earned gold (CAGR ~23.4% vs 13.2%).
"These figures reflect that gold ETFs soared on recent safe-haven demand, while equities benefited from India's strong fundamentals and easing monetary conditions. Notably, gold's low correlation with stocks makes it a powerful hedge," Garg's note said.
Gold Vs Nifty:
According to the expert, Gold's volatility stems from its role as a hedge and speculative asset. Heightened global uncertainty (Fed policy shifts, trade tensions, currency swings) has driven flight-to-gold. Central bank purchases and inflation hedging also buoy prices. However, once gold hit record highs, profit-taking kicked in (as seen in March), reflecting "performance-chasing" behaviour. Conversely, equities have been buoyed by stabilizing macro factors: sliding inflation, lower bond yields, higher liquidity and improving corporate earnings. In short, gold's swings mirror risk-off episodes, while the equity rally reflects India's domestic growth resilience.
That being said, Garg has highlighted three investment strategies with a timeframe of 1-year, 1-3 years, and more than 3 years.
1. Short-term (High volatility is expected (gold pulled back in May, equity swings remain).
- Low risk: Emphasize capital preservation. Consider short-term gilts/bank FDs or money funds, with gold ETFs (~5-15%) for stability. Avoid high equity exposure.
- Medium risk: A balanced mix. One might allocate ~40-50% to gold ETFs and commodities (as a hedge), ~30-40% to high-quality equity funds, and the rest to debt. If markets dip, re-balance.
- High risk: Equity-oriented but still hedge. E.g. ~70-80% in diversified equities (Nifty 50/large-cap funds), ~10-20% in gold ETFs and cash. Equity gains can be chased, but keep gold in case of sudden shocks.
2. Medium-term (1-3 years): A full business/economic cycle is involved, so balanced growth.
- Low risk: Maintain significant gold/debt. Perhaps ~30-40% equity, ~30-40% gold ETFs (or sovereign gold if available), and the rest in bonds or hybrid funds. The gold holding protects against downturns; stable returns.
- Medium risk: More growth tilt. E.g. ~60% equity, 20-30% gold ETFs, 10-20% debt. This mix captures stock-market upside (given India's growth outlook) while gold cushions volatility.
- High risk: Equity-heavy. E.g. ~80-90% in equity funds (preferably diversified and mid/small-cap for higher gains) and ~10% in gold ETFs. Over 2-3 years, equities are expected to rise (barring shocks); gold serves mainly as a minor hedge.
3. Long-term (>3 years): Equities tend to dominate wealth creation, but gold still has a role.
- Low risk: Even for long horizons, caution suggests a notable safe portion. E.g. 50-60% in equity (index funds/SIP), ~15% in gold ETFs, rest in fixed income. This 5-15% gold slice reflects its hedge property.
- Medium risk: Growth-oriented mix. E.g. 70-80% equities, ~10% gold ETFs, balance debt or hybrid. The equity portion drives returns; gold provides diversification.
- High risk: Maximum equity. E.g. 85-90% equities (including small/mid-caps for extra growth), ~5-10% gold ETFs (or minimal); cash negligible. Gold here is a minor "insurance."
In each case, gold ETFs are preferred over physical gold for liquidity and ease of transaction. Experts advise keeping 5-15% in gold as a hedge. As one industry commentator notes, recent investor moves into gold ETFs largely reflect performance chasing, but also a search for diversification. With inflation subdued (CPI ~3.2%) and rates at cyclical lows, equities may offer strong real returns over medium/long term. Still, gold's "tenuous correlation" with stocks makes it useful for dampening overall portfolio risk, said Garg.
Overall, as of May 2025 India's macro outlook - low inflation, supportive RBI policy and robust growth - favors equity exposure for the long run. The expert added, "Yet gold ETFs remain a valuable diversifier and safe-haven, especially amid geopolitics or equity volatility Investors are advised to adjust the gold/equity mix by horizon and risk appetite. For instance, in an uncertain short-term, a higher gold allocation can preserve capital, while over years a heavier equity stance (backed by 5-15% gold) aligns with India's growth trajectory."
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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