For over 18 months, gold prices have surged on the back of geopolitical tensions and trade-related uncertainties, and the rally shows little sign of cooling. On September 16, gold futures on the MCX with October expiry hit a life high of Rs1,10,574 per 10 gram, while December contracts traded as high as Rs1,11,637. In global markets, prices touched a record $3,697.70 an ounce.
So far, in 2025, 24-carat gold has surged 43 per cent in India, making it the standout asset class. By contrast, the BSE Sensex is up just 5.4 per cent. Looking further back to the start of 2024, gold has risen over 75 per cent, compared with 14 per cent of the Sensex.
Several factors are fuelling the rally. Geopolitical risks from the Russia-Ukraine war and conflict in the Middle East have pushed investors towards safe-haven assets. US tariffs have heightened trade tensions and concerns about global growth. Central banks, wary of uncertainties, have also been building gold reserves at a rapid pace. Expectations that the US Federal Reserve will cut interest rates have added to momentum.
“Geopolitical risks are adding to safe haven demand. Ongoing tariff disputes and political uncertainties between US President Donald Trump and the Federal Reserve are fuelling concerns about the Fed’s independence and the broader policy path. These cross currents are keeping investors anchored to gold as a hedge,” said Chintan Mehta, CEO, Abans Financial Services.
The rally has sparked strong investment demand. Gold exchange-traded funds (ETFs) in India saw net inflows of Rs2,189 crore in August 2025. Between January and August, inflows reached Rs11,467 crore, almost double that of the inflow during the same period in 2024 (Rs6,134.67 crore), according to data from the Association of Mutual Funds in India.
Globally, the trend is similar. According to the World Gold Council, gold ETFs saw inflows of 397 tonnes between January and June 2025.
Meanwhile, equities have struggled. Foreign institutional investors have sold close to Rs1.41 lakh crore worth of Indian equities this year till September 15, adding to volatility and dampening returns.
The contrast has left many investors wondering if they should raise their gold allocations, even at the cost of trimming equities.
“In the near term, gold offers defensive comfort in an uncertain macro environment, while equities remain the better long-term wealth creator once earnings visibility improves,” said Rajul Kothari, partner at Capital League Private Wealth Management.
Gold, however, is cyclical. Its bear phases can be prolonged. From around $1,600 an ounce in 2013, it remained subdued for years, only reclaiming that level in 2020 during the Covid-19 pandemic. In India, prices averaged Rs29,600 per 10 gram in 2013 and were nearly flat by 2017, averaging Rs29,667.50.
Given the massive run-up already, analysts see scope for near-term consolidation. “The upside from here may be more measured compared to the past year, but as long as uncertainty persists, gold will retain its safe-haven appeal,” said Kothari, who expects a modest correction of 2-5 per cent to around $3,500–3,600 an ounce.
At home, analysts highlight positive drivers for equities. Inflation has cooled, and recent GST cuts are expected to boost consumption and business growth. Emkay Global Financial Services has set a target of 28,000 for the NSE Nifty50 by September 2026, an 11 per cent upside from its 16 September close of 25,239.10. “As growth prospects become clearer and risk appetite returns, there could be some movement from gold to equity,” said Ram Medury, founder and CEO of Maxiom Wealth. “The positive macro outlook suggests that while gold may ease as risk sentiment improves, the Nifty50 is positioned to perform well in the medium term, benefiting from a revival in corporate earnings and improved investor confidence.”
History suggests that while gold shines in crises, equities outperform over full market cycles. During the 2008 financial crisis and again in 2020 amid the pandemic, gold outperformed as markets plunged. Yet equities rebounded and ultimately delivered stronger long-term growth. “Gold excels as crisis insurance, while equities remain the primary wealth-creation asset in the long run,” said Medury.
Kothari pointed out that the BSE Sensex has delivered annualised returns of around 12–14 per cent over the long term, compared with 8–9 per cent for gold. “Gold has shone particularly in times of crisis or global stress, but equities have been the more consistent driver of long-term wealth. The lesson for investors is clear—gold is an essential diversifier and a hedge, but equities remain the growth engine of portfolios,” she stressed.
The standard advice is to keep 5–10 per cent of a portfolio in gold. In the current climate of geopolitical risk and volatile currencies, Kothari believes allocations at the higher end, closer to 10 per cent, make sense. “But going materially overweight would mean sacrificing the long-term growth that equities provide,” she cautioned.
Medury echoed this, noting that while the usual recommendation is 5–10 per cent, there is now “a strong case” to maintain or slightly increase exposure, particularly for risk-averse investors.
Gold’s rally has been spectacular, but experts warn against overexposure. It remains a hedge and safe haven, especially in turbulent times. Equities, despite short-term volatility, continue to offer stronger long-term returns. For investors, the strategy is clear: strike a balance.