As gold and silver prices hover near record highs this festive season, investors face a familiar dilemma — whether to join the rally or wait for a correction. With geopolitical tensions, interest rate expectations, and dollar movements shaping global sentiment, the glitter of the yellow metal could turn volatile in the weeks ahead, feel experts.The festive rush and safe-haven appeal are supporting prices for now, but several factors could test gold’s strength if global risk appetite improves.Manav Modi, Senior Analyst – Commodity Research at Motilal Oswal Financial Services, believes gold’s rally could be nearing exhaustion unless global uncertainty deepens further.“There are a few headwinds which could cap gold’s rally — easing geopolitical tensions, changes in rate cut expectations, outflows in investment demand and rising growth prospects as the IMF expects,” Manav Modi told TOI.He advises investors currently holding positions to remain cautious and hedge against volatility. “Any investor holding positions should hedge in exchanges and keep booking profits. Those looking to enter afresh can wait for a dip that aligns with their risk-reward outlook,” he added.
Market triggers to watch
Jateen Trivedi, VP – Research, Commodity, at LKP Securities, highlights that the next phase of price movement will depend on how major global triggers unfold.According to him, “risk-off” conditions that could cause gold and silver to decline include:
- A hawkish US Federal Reserve or higher real yields delaying rate cuts.
- Dollar strength, which typically weighs on both metals.
- Geopolitical de-escalation or easing trade tensions that reduce safe-haven demand.
- A slowdown in China’s industrial growth, which could hit silver harder.
- ETF outflows or inventory build-up, which may accelerate price corrections.
Trivedi also suggested investors to tailor their approach according to their objectives:
- Festival buyers (jewellery): “Buy what you need. Avoid leveraging or large lumpsums purely as an ‘investment’ at record highs.”
- Long-term investors: Prefer systematic accumulation (SIP) or staged buying to smooth volatility. Accumulate on meaningful dips (5–10% from current highs) rather than chasing tops.
- Tactical traders/speculators: Use strict stop-losses; silver being higher-beta, size positions accordingly.
- Existing large positions: Consider partial profit-booking to de-risk, redeploy using SIPs on pullbacks.
investment strategy
Trivedi suggests that investors align their metal exposure with their financial goals and risk profile.For risk-averse or long-term investors:Sovereign Gold Bonds (SGBs) are considered the best option, offering 2.5% annual interest, tax benefits at maturity, and direct linkage to gold prices. Gold ETFs provide a low-cost, liquid alternative.For silver exposure:Silver ETFs or digital silver remain the preferred routes, offering easy transactions without storage costs. As SGBs are not available for silver, these instruments fill the gap effectively.For jewelery buyers:Physical gold remains suitable for cultural or ritual purposes, but experts advise against treating it as a high-return investment given making charges and liquidity limitations.For short-term traders:Leverage-based products such as futures should be used only by experienced participants with strict stop-losses and sound risk management.
Smart portfolio allocation & hedging playbook
LKP Securities expert provide 3 broad guidance for portfolio allocation and risk management:
- Model allocation: The asset allocations for different risk profiles, help investors balance equities, gold, and silver based on their market views and investment goals. Adjustment according to age, objectives, and risk tolerance varies investor to investor.
Source: LKP Securities
- Hedging: Use currency hedges if holding significant FX exposure, diversify across asset classes, and consider partial profit booking. For inflation protection, combine SGBs with real assets like selected commodities or real estate.
- Risk management: Employ trailing stops for trading positions, maintain emergency liquidity, and avoid overleveraging.
(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
