GOLDEN HEDGE AGAINST RISK

GOLD PRICES HAVE SURGED OVER 32% IN ONE YEAR. DOES THE RALLY HAVE MORE STEAM LEFT, ESPECIALLY IN THE LIGHT OF GLOBAL UNCERTAINTY, OR IS A CORRECTION ON THE HORIZON?

- BY TEENA JAIN KAUSHAL

GOLD HAS ONCE again become an alluring prospect across the world—this time because of US President Donald Trump's unilateral imposition of “reciprocal” tariffs on 60 countries. His announcement has sent ripples through global markets, unsettling investors and triggered an escalating trade war.

As always in times of turmoil, all eyes turn to gold—the timeless safe-haven asset.

“The imposition of US tariffs is likely to fuel inflationary pressures, with projections suggesting US inflation could rise above 5%, while GDP growth risks turning negative,” says Vandana Bharti, Head of Commodity Research at SMC Global Securities. In this tumultuous period—where corrections are being seen across asset classes including bonds, the dollar, equities, and commodities—gold is emerging as a key hedge.

GOING FOR GOLD

Gold has surged 32% and 16% over one-year and seven-year periods, respectively

Geopolitical tensions, record central bank purchases, inflation, and a weakening dollar have reinforced gold’s status as a safe-haven asset

The US Fed's interest rate policy, global economic stability, and currency movements will play a crucial role in determining gold prices

Corrections are expected, but long-term fundamentals favour continued strength

Experts recommend allocating 5-15% of a portfolioto gold and buying during price dips for long-term gains

As of now, gold has outperformed major asset classes, with prices rising over 15% year to-date. “Central bank purchases, which reached a record high of over 1,100 tonnes in 2023 according to the World Gold Council, along with steady inflows into gold ETFs, are expected to continue supporting the rally,” adds Bharti.