MCX gold rate today reclaims ₹1,60,000 mark. How much gold should you hold in your portfolio?

Gold rate today: The latest slump in gold prices has created a window of opportunity for investors, especially those who missed the rally initially, as the outlook for precious metals remains firm in the near-to-medium term.

As a rule of thumb, analysts typically advise allocating 5-15% of their portfolio towards gold as it acts as a hedge during times of uncertainty and an effective diversifier. These qualities get reinforced by the 80% surge seen in MCX gold prices in a year, as against an 8% rise in the Nifty 50 index.

Hedge fund manager and founder of Bridgewater Associates, time and again, has reinforced this view that, irrespective of gold price or the rally seen in bullion, investors should allocate 5-15% to the precious metal in light of the rising US debt, de-dollarisation trend and growing geopolitical uncertainty.

MCX gold April futures reclaimed the ₹160,000 mark today, rising as much as 4.5% over its last close, reversing course following a steep correction last week, as a weak US dollar and lower-level buying emerged.

However, from their all-time high of above ₹1,93,000, gold prices are still trading at a steep discount of over ₹30,000, creating an opportunity to buy the dip.

Gold outlook remains bullish

Harshal Dasani, Business Head at INVAsset PMS, said that the current softness in gold prices looks more like a pause than a reversal. He believes, historically, such phases have offered better entry points for long-term allocators rather than signalling the end of the cycle.

NS Ramaswamy, Head of Commodity & CRM at Ventura, also believes in the longer-term strength in gold prices. He expects MCX gold prices to rise to ₹180,000 and then to ₹200,000 if prices can break past the resistance at the 163,000–165,000 zone.

However, if gold fails to sustain above the 163000–165000 zone on a closing basis, a corrective move toward 140000 is possible, he cautioned.

How much to allocate to gold?

Now, the 5-10% asset allocation rule should be viewed as a dynamic decision rather than a static rule. To decide how to switch between the two ends of this range, analysts have shared a few markers.

Since gold is a non-productive asset, its role as a store of value and a hedge against uncertainty makes it an essential component of a well-diversified portfolio.

There should always be some allocation to gold, as it acts as both a store of value and a form of insurance against deterioration in the overall health of the economy, said Ramaswamy.

He explained that investment decisions should be influenced by the factors that tend to move gold. Central banks are among the largest buyers of gold for their foreign exchange reserves. Sustained central bank accumulation of gold can be viewed as a positive long-term signal, often indicating that gold may outperform over the medium to long term, he said.

Also, during environments of geopolitical tensions like war or disputes, maintaining a higher allocation to gold can help protect portfolio value.

Falling dollar, rate-cutting cycle, overvalued markets and poor macroeconomic cues also support gold buying, he said, making a case for higher allocation to the asset.

The case for moving towards the higher end of the allocation (15%), therefore, strengthens when macro uncertainty rises — particularly when real rates compress, equity–bond correlations weaken, currencies face pressure, or geopolitical risks intensify, Dasani said, echoing similar views. "In these regimes, gold transitions from a hedge to a core stabiliser of portfolio volatility."

The recent rise in gold had been influenced by some of the above-mentioned factors. Geopolitical and economic risks heightened amid the Russia-Ukraine war, the Iran-Israel conflict and the imposition of tariffs by US President Donald Trump globally.

Moreover, the Fed cut rates thrice last year, and the US dollar weakened, boosting the appeal for gold.

At the lower end of the range (5%), gold suits investors who are structurally overweight growth assets, benefit from stable income visibility, and operate in an environment where equities and bonds still provide reasonable diversification, he said. In such phases, "gold plays a residual insurance role".

However, investors must remember that when gold prices tumble, they tend to remain in a range for quite some time. A WhiteOak report suggests that the last time gold prices peaked in 2012, they languished for a 7-year period.

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.