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Gold Rush: Is the Shine Really as Bright as It Seems?

In recent times, gold has been the shiny star everyone’s eyes are glued to. With prices soaring post-COVID, there’s been a renewed fascination with this precious metal. Investors are flocking to gold funds, bonds, and ETFs, enchanted by the glimmer of recent returns. But before you dive headfirst into the gold rush, let’s pause and take a step back. Is gold really the golden ticket? Or are we falling into the classic trap of chasing returns?

The Golden Illusion

It's hard to argue against numbers, right? Over the last few years, gold has surged—rising from around  ₹42,000 per 10 grams in 2020 to a staggering  ₹86,000 in 2025. That’s roughly a 2X return or about 16% CAGR. Impressive! Some might even say it has outperformed equity and other asset classes. The temptation is real. But here’s the question we all need to ask ourselves: Will it continue like this forever?

Gold, like all asset classes, has its cycles. What’s crucial to understand is that its rise isn't linear. Unlike fixed deposits, bonds, or PPF, gold doesn’t promise a predictable, steady return. It dances to the rhythm of the global economy, inflation, tax policies, currency strength, demand-supply dynamics, and much more. This volatility means that while you might see incredible returns in certain periods, there are also long stretches where gold can leave you wanting more.

The Hidden History: Gold’s Quiet Years

Let’s take a trip down memory lane. Here are a few periods when gold was... well, a little dull:

• 1980-1984: Gold prices ranged between ₹1,800 and ₹1,970 per 10 grams for five long years—barely any movement.
• 1988-1991: Over four years, prices stayed within the ₹3,130-₹3,466 range.
• 1992-2002: For over a decade (yes, a decade), gold remained between ₹4,334 and ₹4,990. Hardly the exciting growth story investors today might expect.
• 2012-2019: Even in the modern era, gold took a breather. From ₹31,050 to ₹35,220 over eight years—far from the stellar growth we’re seeing now.

So while gold has had its moments of glory, it’s important to remember that there have been periods when it’s moved at a snail’s pace. This isn't to say that gold is a poor investment—it’s just to remind you that it doesn’t always glisten as brightly as it does now.

 

The Problem with Chasing Returns

It's a common investor behavior: we see an asset that has performed well recently, and we rush to get in on the action. But history tells us that this "return-chasing" mentality often leads to disappointment. When too many people flock to the same asset, it can become overvalued, leading to subpar returns in the future. Meanwhile, the assets that were overlooked due to underperformance often emerge as the stars of the future.

So what’s the solution? Asset allocation.

The Power of Balance: Asset Allocation & Rebalancing

Rather than chasing returns, it's wiser to focus on a well-balanced portfolio. Whether you’re invested in gold, equities, real estate, or debt instruments, the key is to stick to your ideal asset allocation.

For example, let’s say you're comfortable with a 50% equity, 20% gold, 30% real estate mix. If gold outperforms, increasing its weight in your portfolio, rebalance by trimming some gold and reinvesting into equities or other underperforming assets. This disciplined approach ensures you’re not overexposed to any single asset class and helps you stay on course for long-term growth.

Rebalancing is a bit like tending to a garden. When one plant grows too fast, it can overshadow the others. Trimming and nurturing the slower-growing plants keeps the garden balanced and thriving.

Gold Still Has Its Place

None of this is to say gold is a bad investment. In fact, I maintain 15-20% of my assets in gold and recommend the same to my investors. Gold is a fantastic asset for diversification—it’s tax-efficient, beats inflation, and provides a hedge during economic uncertainty. It’s also one of the easiest assets to liquidate, which can be a lifesaver when you need quick cash. Plus, in times of global risk, it’s often seen as the “safest” store of value.

But remember, it’s not a golden goose that lays eggs forever. The recent rally doesn’t guarantee future performance.

The Takeaway: Stick to Your Strategy

The best opportunities often arise when no one’s paying attention. While others may be chasing gold’s recent glitter, there may be quieter, underperforming assets that are poised to shine next. So, instead of getting swept up in the gold fever, take a step back and review your asset allocation. Are you sticking to your ideal mix of equities, debt, gold, and real estate? If not, now’s the time to rebalance.

Remember, in both life and investing, volatility is inevitable. But it’s not something to fear—it’s something to manage. Straight lines might look comforting, but they usually lead nowhere. Embrace the ups and downs, and stick to your strategy.