Gold Price Soars to Record High: Is It Time to Sell Stocks?
The gold market is experiencing a remarkable bull run. Prices have climbed to an all-time high, currently sitting at ₹1.45 lakh per 10 grams. Many analysts believe ₹1.5 lakh is within reach soon. This surge has investors asking a critical question: should they sell stocks and buy gold instead?
Gold's Spectacular Performance
Gold has delivered impressive returns over recent years. In 2024, gold gained 20% while the Nifty index rose only 8.7%. The momentum continued into 2025, with prices jumping from approximately ₹78,000 to ₹133,000 by mid-October. That represents a 70% increase in less than a year.
Looking back further, gold has risen sharply since February 2024. The price moved from around ₹64,000 to today's levels, marking a 108% gain in just 20 months. Since late July 2024, the increase has been even more dramatic—132% in slightly over 14 months.
What's Driving Gold Higher?
Three main factors are fueling gold's current rally:
1. US Trade Policy Fallout
Gold traditionally serves as a safe-haven asset during uncertain times. Recent US tariff policies under President Donald Trump have created significant market uncertainty. Markets dislike unpredictability, driving investors toward gold.
These policies have also contributed to inflationary pressures in the US. While inflation hasn't spiked dramatically yet, it remains a concern as long as tariffs continue. Historically, gold has proven an effective hedge against inflation.
Additionally, concerns about a potential US recession in 2026 are growing amid geopolitical and trade risks. Gold typically performs well during recessionary periods.
2. Geopolitical Tensions
The Middle East remains a hotspot for financial markets. Recent events in Yemen and Iran have heightened regional tensions despite peace agreements elsewhere. Markets fear renewed hostilities could trigger another conflict.
Gold has long been viewed as a wealth preservation tool during political turmoil. Throughout history, people have turned to physical gold during uncertain times. This trend continues today, with the bullion market closely monitoring Middle Eastern developments.
3. Speculation and FOMO
Pure speculation is contributing to gold's rise. Some investors are buying simply because prices are increasing—a phenomenon known as surfing price momentum. Fear of missing out (FOMO) drives additional buying as traders chase short-term profits.
However, speculation is unreliable. You cannot depend on momentum traders to keep pushing prices higher indefinitely. If you're considering gold purchases based on speculation, proceed with caution.
Should You Sell Stocks for Gold?
Equitymaster recommends maintaining perspective during gold's bull run. When everyone talks about rising prices and ambitious targets like ₹2 lakh per 10gm, remember that reversals can occur. While bulls currently dominate, underlying factors could change.
The firm suggests keeping 5-10% of your portfolio in gold at all times. However, gold should not replace other assets, particularly stocks. Equities remain vital for long-term wealth creation.
If you own fundamentally strong stocks purchased at reasonable valuations, you're already well-positioned. No action may be necessary. During market corrections, you might consider buying more of these quality stocks instead of selling them for gold.
Regularly review your portfolio for overvalued stocks or companies with deteriorating fundamentals. But don't make drastic shifts based solely on gold's current performance.
Final Thoughts
Holding some gold makes sense for portfolio diversification. Speculating on gold prices does not. Always conduct thorough due diligence before making investment decisions. Remember that both gold and stocks have roles in a balanced investment strategy.
