In times of uncertainty with faith shaken globally in paper wealth, expect a gold rush – it is a sage counsel “not of an age, but for all time.” The good old bard of Avon cautioned against falling for all things that glitter but Indian women knew better and the central bankers globally have endorsed their wisdom with unprecedented investments in gold. In keeping with the trends globally and increasingly in the Eastern part of the planet, the Reserve Bank of India has also seen its gold reserves cross 880 metric tonnes in the first half of 2025-26 with the central bank adding 0.2 metric tonnes in the last week of September.
But what are the options when uncertainty looms large and the high price of gold begins to hurt? “Gold is a flight to safety in times of uncertainty. It is a safe haven in such times but there is a limit to which it can be seen as a safe haven and at some point there is bound to be a correction and it is hard to say if it will be a violent correction or a gradual one,” says Dr Duvvuri Subbarao, economist, author and the former governor of the Reserve Bank of India. The gold prices did in fact hit a pause and have just witnessed a reversal.
Typically, Dr Subbarao explains, when the dollar value goes down, the gold price go up but surprisingly now both the dollar is still holding up and so is the price of the yellow metal.
A former bureaucrat, who has been closely associated with policy planning in the past but did not wish to be named, has this to say: “it is basically a feeling that no other financial asset in the present circumstances will do as well as gold. Consider this: The stock valuations are too high and do not reflect the underlying profitability and even if it is true in some big countries making a correction in the stock prices inevitable, there will be subsequent correction here in India too and in such an environment people tend to invest in gold.”
On his advice on investments into gold, he says, “while there are enough and more experts that people to seek guidance from, I for one, would not advise anyone to buy gold at the moment as the gold prices are inflated.” On the movement thus far and the sustained demand for gold even during the Diwali festival, the former bureaucrat opines: “The people are moving away from financial assets and when you get a speculative boom in things like bitcoins and it not surprising that gold follows in lockstep, more so, it is limited in quantity and therefore bound to see its price rise.”
Navneet Munot, CEO, HDFC Asset Management Company perhaps sums it up best for investors with a pithy observation: “Investors should not extrapolate last year’s returns of gold and silver. Historically, they have had very long periods of underperformance and are also prone to high volatility.”