India's favourite safe haven? Why gold hype is facing a reality check in 2026

Gold's run as the year’s easiest safe-haven trade has slowed. After a strong rally earlier this year, the yellow metal has corrected from its highs. Gold ETFs have seen some outflows, the dollar has stayed firm, and investors who bought near the top are now wondering whether the asset is still doing the job it is expected to do in a volatile market.

Analysts say the answer is not that gold has stopped being a safe haven. The rally had simply become too sharp.

Gold gained nearly 25-30% over the past year as investors looked for protection from inflation, geopolitical risks and uncertainty around interest rates. But that rally has now given way to profit-booking. Some of the fear premium built into prices has also reduced as geopolitical tensions have eased from their peak.


"Gold has not lost its appeal as a safe-haven asset. It has simply cooled off after a strong rally," said Paresh Bhagat, chairman, Mangal Keshav Financial Services.

Bhagat said the recent pause has been driven by profit-booking, easing geopolitical tensions and investors reassessing their allocation after strong gains. He said ETF outflows should be seen in context, as they came after a period of strong inflows and may reflect portfolio rebalancing rather than a loss of interest in gold.

Fed holds the key

The US Federal Reserve remains the biggest factor for gold from here. Earlier in the year, investors expected rate cuts to support prices. But sticky inflation has kept the market focused on the possibility that rates may stay higher for longer.

When bond yields and cash returns look attractive, the opportunity cost of holding gold rises. A firm US dollar has also worked against gold. Since the metal is priced globally in dollars, a stronger dollar makes it more expensive for buyers using other currencies.

Also Read: Gold’s sharp correction: What lies ahead for prices?

The rally earlier this year was also helped by geopolitical fear, especially around West Asia. As those risks became more contained, the immediate panic trade started to fade.

This explains why gold has not moved like a classic safe haven in recent weeks. It has not risen each time markets became nervous. Instead, prices have been pulled between rate expectations, dollar strength, ETF flows and profit-taking.

Sidharth Sogani Jain, founder, CEO and fund manager at Blue Aster Capital and CREBACO Global, said gold has not lost its place in portfolios, but has moved out of the market’s immediate focus.

"Gold has not stopped being a safe-haven asset. It has simply taken a back seat for now," he said.

He said investors are currently more interested in growth assets, with the S&P 500 and Nasdaq near record highs and the US earnings season approaching. In that environment, capital has moved towards equities and away from protection trades.

Sogani Jain said lower ETF flows do not necessarily point to weaker faith in gold. They show that investors see better short-term opportunities elsewhere. He expects markets to remain focused on corporate earnings, Federal Reserve signals and the equity rally over the next six to eight weeks. Gold could return to favour if valuations look stretched, rate expectations change or geopolitical risks rise again.

What should retail investors do?

For retail investors, the question is not whether gold will move up immediately. It is whether their portfolio has the right allocation to the metal.

Gold is not meant to replace equities or deliver the highest return every year. Its role is to reduce portfolio risk during periods of inflation, currency weakness, geopolitical stress and market shocks.

Shruti Jain, chief strategy officer at Arihant Capital Markets, said gold should not be treated as a trading bet by long-term investors.

"Gold has always been a safe haven and it continues to deserve a place in every investor’s portfolio. It is not an asset for speculation. Its primary role is to provide diversification and balance, particularly during periods of uncertainty," she said.

She said investors can maintain an allocation of around 10-15% in gold, depending on their risk profile and asset mix. Those who are under-allocated should build exposure gradually, preferably through SIPs in gold ETFs, instead of trying to time the market.

Bhagat suggests a slightly lower allocation of 5-10% for most investors. He said gold should be used as a hedge against inflation, currency volatility and geopolitical uncertainty, not as a product to chase returns.

DSP Netra’s view on precious metals also points to caution at current levels. Its report says gold is now in a zone where the risk-reward is balanced. A better margin of safety may come only if prices correct further or spend time consolidating.

"Gold’s outperformance over stocks and bonds has reduced, though it remains in line with long-period bull markets. It suggests that investors should look for stronger signals before taking an overweight position. These include a large discount to fair value, stronger buying from jewellery consumers, central banks or ETFs, a flat or weaker dollar, and lower participation in futures and ETF markets after a phase of heavy selling," the report noted

For investors, that means there is no need to panic out of gold. But there is also no need to rush in after a big rally.

Those who already have enough gold in their portfolio can hold their allocation. Those with little exposure can add slowly. A staggered approach is safer than making a large lump-sum investment when prices are still adjusting.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)