Gold has been the biggest buzzword in the investing world this year. With an eye-watering 50% rise in 2025 alone, gold prices have crossed the $4000 mark in the international market, as investors lap up the precious metal amid a host of worries.
This rally in gold prices comes on top of a 27% surge in 2024 and a 13% rise in 2023. Yet, investor appetite is showing no signs of abating.
While it’s difficult to predict whether gold prices have peaked, analysts at DSP Mutual Fund believe say the margin of safety is no longer present. “The gold bull market seems far from over, but it may pause for an extended period, and meaningful pullbacks could offer chances to add,” it noted.
How to trade gold now?
Gold’s meteoric rise follows central bank buying, dollar weakness, sustained ETF inflows and retail investors’ bid to hedge their portfolios against geopolitical worries.
Moreover, hopes of a US Federal Reserve rate cut have also buoyed demand for gold as a lower interest rate environment raises the appeal of non-yielding assets like bullion.
Gold prices, meanwhile, approach DSP’s fair-value zone of $3166-$4484 and have crossed the midpoint at $3,825. Against this backdrop, the brokerage advised how investors can think about gold allocation:
1. Do nothing and hold on: In past cycles (e.g., the 1980s), gold prices have run as much as 40% above the theoretical range, but this leaves investors dependent on market sentiment and with no margin of safety.
2. Reduce gradually: Trim about 5% per week to cut at least half (or more) of the overweight position i.e., sell into strength between $3860 to $4000. This is the time to turn conservative, it opined.
While DSP said this is not a call on the end of the bull market, it may well continue, but steep drawdowns are possible, advising caution.
Ross Maxwell, Global Strategy Lead at VT Markets, also believes that gold is still in an overbought state, expecting short-term corrections on account of profit-taking and not as a fundamental reversal.
“The long-term trend remains encouraging as long as there is solid bullish momentum, even though the $4,000 level can be viewed as psychological resistance. For investors who want to profit from gold’s reputation as a safe-haven asset and hedge against risks, a dollar-cost averaging strategy is still a good option,” he opined.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
