Domestic market sentiment seems to have improved after signalled that trade negotiations between New Delhi and Washington are underway and both countries may soon reach a common ground to finalise a deal.
On Tuesday (US local time), Trump said that India and the US “are continuing negotiations to address the trade barriers between the two nations.” He also added that he was looking forward to speaking with Prime Minister Narendra Modi in the upcoming weeks.
PM Modi also reciprocated with similar gestures, saying that he was also looking forward to speaking with President Trump. “We will work together to secure a brighter, more prosperous future for both our people,” PM Modi wrote on X.
The positive developments between the two countries pushed equity benchmarks, the Sensex and the Nifty 50, higher and dragged MCX Gold prices lower from record high levels in Wednesday’s session.
Market participants now expect the return of risk appetite in investors. However, considering past experiences, it could be too early to discount a trade deal tilted in favour of India.
The current situation has created a dilemma for investors: whether to increase their exposure to equities or gold at this juncture.
What is driving gold’s stellar bull run?
Domestic spot gold prices have surged over 40 per cent this year so far, driven by strong demand from central banks, exchange-traded fund inflow, and rate-cut speculation. Safe haven demand has also increased due to heightened geopolitical tensions and worries about the impact of President Trump’s tariffs on the global economy.
Experts believe gold’s stellar bull run this year can continue due to aggressive central bank buying, US Fed rate cuts, and heightened concerns over global economic growth due to US President Donald Trump’s tariff policies. Even though there could be intermittent profit booking, experts believe it may be the right time to increase exposure to the yellow metal.
Ajay Garg, CEO of SMC Global Securities, underscored that the recent trade disturbances and new agreements involving around 80 countries have heightened fears of economic turmoil and a potential recession, creating favourable conditions for gold.
Garg added that the push towards de-dollarisation, combined with record physical and ETF demand, a drop in the dollar index, and a supply squeeze, has sent gold to record highs. Record buying by central banks has also made gold a hot favourite among retail investors, with volatility in the equity markets making it even more attractive.
Is it time to trim exposure to equities?
Gold’s medium to long-term outlook remains positive, and some experts believe MCX Gold prices may rise to even levels of ₹1,15,000 per 10 grams by the end of the current calendar year. This seems to have prompted some experts to suggest trimming exposure to equities.
“Gold prices on MCX may touch 1,15,000 per 10-gram mark by the end of 2025 on heavy buying by central banks, US Fed rate cuts and geopolitical uncertainties. One should trim exposure to equities and buy gold,” said Anuj Gupta, a SEBI-registered commodity expert.
However, investments in gold and equities should not be made at the expense of one another. Instead, a fine balance between the two should keep the portfolio well-diversified.
“Diversification is essential for optimising one’s portfolio return and reducing risk. The effectiveness of diversification varies among individuals, as it is influenced by factors such as risk appetite and investment horizon,” said Saumil Gandhi, Senior Analyst, Commodities, at HDFC Securities.
Given the current scenario, Gandhi believes investors with a short-term horizon, typically one to three years, should increase their allocation to bullion, such as gold and silver. In contrast, long-term investors should maintain a well-diversified portfolio with a higher exposure to equity markets and a 10–15 per cent weight to the bullion.
Yash Sawant, the manager of commodities at Choice Broking, said given gold’s elevated levels and upcoming FOMC meeting, it is advisable to hold existing long positions but avoid initiating fresh buys until the Fed’s stance becomes clearer. Post-FOMC, some consolidation or a pullback in gold prices is possible, he said.
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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.