Gold glitters but investors must shed exuberance and extremes

There is a saying in Hindi, which roughly translates to ‘there are as many versions of anything as there are people’. This is relevant in the world of investing. With wildly different predictions being thrown around by credible institutions and experts over gold, it’s becoming increasingly difficult for investors to separate noise from erudition. In such times, perhaps the best investment advice is to remain calm, skeptical of extreme forecasts, and adopt a golden rule: don’t get swayed by exuberance on either side. In a recent forecast, Citi Research has contended that gold will rise from $3,200 to $3,500 per ounce over the next three months. The rationale? A surge in gold buying by Chinese insurers and renewed safe-haven flows triggered by tariff tensions and overall market weakness. These plausible macroeconomic factors-geopolitical instability and financial market jitters, made worse by the ongoing global trade war, have historically driven investors toward gold. The yellow metal’s reputation as a safe store of value during uncertain times has once again come to the fore.

There is a tweet by Robert Kiyosaki, author of the best-selling personal finance book Rich Dad Poor Dad, in which he claims that gold will soar to an astonishing $30,000 per ounce by 2035. While such dramatic figures make for captivating headlines, they can also fuel irrational exuberance and unrealistic expectations. Lest one forgets, there are voices suggesting the opposite. A Morningstar analyst, based in the US, has projected a steep 38 per cent fall in gold prices in the coming years. If this materialises, it will bring the price of gold in India down to approximately Rs. 55,000 per 10 grams-a dramatic drop from the current price, which is hovering tantalisingly close to Rs. one lakh per 10 grams. This forecast could be rooted in expectations of quick resolution of trade and Russia-Ukraine wars, rising interest rates, stronger economic growth, or lower inflation, which all traditionally reduce the appeal of non-yielding assets like gold. Given these sharply divergent predictions, potential investors face a dilemma: whom to believe? The reality is no one; neither Citi, nor Kiyosaki nor Morningstar has a crystal ball.

The world economy is shaped by a complex, often unpredictable mix of politics, market psychology, interest rates, inflation data, and international trade dynamics. Predicting gold prices with precision over long periods is more of guesswork and not scientifically evolved. In these circumstances, a pragmatic investor should first understand the financial goals and ponder over whether buying gold is for short-term gains or as a long-term hedge against inflation and volatility? If it’s the latter, then price fluctuations in the short run should not be a major worry. One should avoid overexposure to any single asset class, including gold given that diversification remains the cornerstone of sound investing. Gold can certainly have a place in a well-balanced portfolio but making it your entire investment thesis could expose you to unnecessary risk. Third, be wary of extremes.

History has shown that markets tend to overreact on the upside and downside. Chasing parabolic rises or selling in panic is a recipe for regret. Investors would be well advised to follow the golden rule of investing—avoid extremes and exuberance. They should stay grounded, informed, and diversified.

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