Investing

Should you add Gold to your portfolio?

Is Gold, which has historically been considered as a safe haven, worth adding to your portfolio? Let's find out!

Team Dhan

02 Sep 2025 — 3 min read

Gold has long been a trusted way to safeguard wealth against inflation, currency fluctuations, and economic shifts. While modern investors have many choices, like stocks and mutual funds, gold still holds a unique place in a balanced portfolio.

Why consider investing in Gold?

Gold has historically been viewed as a safe-haven asset. When markets turn volatile, or inflation rises, gold prices often remain stable or even increase, making investing in gold a useful strategy for preserving wealth.

Benefit	Description
Inflation Hedge	Gold has a strong track record of maintaining value during high inflation.
Portfolio Diversification	Gold moves differently from stocks or bonds, reducing overall portfolio risk.
Liquidity	Gold is easy to buy or sell through ETFs, digital platforms, or physical forms.
Tangible Asset	Unlike equities or bonds, gold is a physical asset with intrinsic value.

How much Gold should you hold?

The amount of Gold you should hold depends on your investment goals and how much risk you’re comfortable with. Experts suggest keeping a small portion of your investments in gold, helping protect your portfolio during uncertain times without affecting your returns too much. Here's a simple guide based on different types of investors:

Investor Type	Risk Level	Suggested Gold Allocation
Conservative	Low	10–15%
Balanced	Medium	5–10%
Aggressive	High	0–5%

Gold vs Stocks: A comparative analysis

Gold and stocks are two very different types of investments. While stocks aim to grow your money over time, gold helps protect it during uncertain periods. Understanding their unique roles can help you build a balanced, safer investment portfolio.

Criteria	Gold	Stocks
Returns	Moderate and stable	High (but volatile)
Risk	Low to medium	High
Liquidity	High	High
Income Generation	No	Yes (dividends)
Inflation Protection	Strong	Moderate
Market Correlation	Low	High

Ways of adding Gold to your portfolio

You don’t have to buy physical gold to invest in it. Today, there are multiple ways to include gold in your portfolio, each with its benefits and drawbacks. Here are some of the most popular options:

Method	Description	Pros	Cons
Physical Gold	Jewellery, coins, bars	Tangible asset	Storage & purity issues
Gold ETFs	Exchange-traded funds tracking gold prices	Highly liquid, safe	The expense ratio applicable
Sovereign Gold Bonds (SGBs)	Issued by the Indian Government	Interest income + capital appreciation	Lock-in period
Digital Gold	Buy/sell gold online via apps	Easy access, no storage hassle	Not regulated like SGBs

Gold during market volatility

Gold often acts as a safety net during uncertain times. When markets are unstable due to economic or global crises, many investors turn to gold because it tends to hold or even increase in value. Here’s how gold has performed in past crisis periods:

Crisis Period	Gold Price Performance
2008 Financial Crisis	+25% YoY
COVID-19 Pandemic (2020)	+27% YoY

Is Gold the right fit?

Gold may not suit every investor in every situation. Understanding when to add gold and how much depends on your goals, market outlook, and current portfolio composition. Below is a guide to help you decide if gold fits your strategy:

Situation	Why Gold Helps	Recommended Action
High inflation environment	Preserves purchasing power	Allocate 10–15% to gold
Stock market volatility	Reduces overall portfolio risk	Add 5–10% via ETFs or SGBs
Retirement or capital preservation goals	Offers long-term safety and stability	Include 10–15% in gold
Already heavy in equities or real estate	Enhances diversification	Rebalance with 5–10% gold
Low-risk tolerance	Adds a defensive asset to your mix	Start with a 10% gold holding

Including Gold can make your portfolio…

Gold may not grow your wealth as fast as stocks, but it protects what you already have. Setting aside 5% to 15% of your investments in a gold portfolio in times of market volatility can keep your finances safer. Whether through coins, digital options, or sovereign bonds, gold helps you prepare better for the future and stay steady during market shifts. It also brings peace of mind, reduces overall stress during downturns, and is dependable in long-term capital preservation.