Why Gold\u2019s Recent Rally Has Changed the Case for Overweighting the Yellow Metal<\/p>\n
After years of strong performance, gold has firmly reasserted itself as a core portfolio component for many investors. Yet, according to Kalpen Parekh, Managing Director and CEO of DSP Mutual Fund, the very strength that made gold attractive over the past few years is also the reason investors should now turn more cautious.<\/p>\n
Speaking on The Wealth Formula<\/em> podcast with N Mahalakshmi, Parekh laid out a nuanced framework for thinking about gold \u2014 not as a return-chasing asset, but as a cyclical stabiliser whose attractiveness waxes and wanes with valuation, currency trends and investor behaviour. His central message was clear: gold still belongs in portfolios, but the era of aggressively overweighting it may be behind us, at least for now.<\/p>\n Parekh was candid in acknowledging the limits of valuation when it comes to precious metals. \u201cThere is no clean way to value gold or silver because they don\u2019t generate cash flows,\u201d he said. Instead of precision, DSP relies on reference frameworks to assess relative attractiveness.<\/p>\n One such framework uses global money supply as a proxy. DSP tracks US M2 money supply along with roughly half of Eurozone M2, excluding the rest of the world to avoid double counting. Over long periods, this combined liquidity measure has shown a relationship with gold prices.<\/p>\n \u201cGold today is much closer to what that framework suggests is fair value,\u201d Parekh explained. \u201cThat\u2019s why we are saying this is not the time to massively overweight gold.\u201d<\/p>\n At around $3,300 per ounce, gold appears fairly valued under this model. While silver looks marginally cheaper \u2014 with fair value closer to $63 versus current levels near $55 \u2014 Parekh noted that even here, the margin of safety has narrowed.<\/p>\n Also Read : US Visa Delays Leave H-1B Holders In India Struggling With Legal Uncertainty<\/a><\/p>\n Reflecting this view, DSP has actively trimmed gold and silver exposure in its multi-asset allocation fund.<\/p>\n Gold and silver allocation reduced from about 22%<\/p>\n<\/li>\n Current exposure lowered to roughly 13\u201314%<\/p>\n<\/li>\n Partial profit-taking after a sharp run-up<\/p>\n<\/li>\n<\/ul>\n \u201cWe\u2019ve taken some profits after a strong rally,\u201d Parekh said. \u201cWhether this proves right or wrong, time will tell. But the big margin of safety we had two to three years ago is no longer there.\u201d<\/p>\n Importantly, he stressed that this shift represents neutrality, not bearishness. Gold remains part of the portfolio, just not at elevated weights.<\/p>\n Parekh also addressed a deeply ingrained Indian mindset: owning gold largely due to tradition and social conditioning. Even he admitted that until about seven years ago, the only gold he owned was his wedding ring.<\/p>\n What changed was a deeper look at long-term data.<\/p>\n \u201cIn most emerging markets, gold has delivered about 6\u20137% returns in dollar terms,\u201d he said. \u201cAdd currency depreciation, and you get low double-digit returns in local terms.\u201d<\/p>\n Over long periods, Indian equities have delivered around 12% median returns, while gold has delivered roughly 11%. The real advantage of gold, however, lies in diversification.<\/p>\n When equities and gold are blended in a 50:50 portfolio and rebalanced annually:<\/p>\n Returns are marginally higher than equities alone<\/p>\n<\/li>\n Portfolio volatility drops by 35\u201340%<\/p>\n<\/li>\n<\/ul>\n \u201cThat was a lightbulb moment for me,\u201d Parekh said. \u201cGold is volatile on its own, but extremely powerful as a diversifier.\u201d<\/p>\n Parekh repeatedly emphasised that gold works best as a counter-cyclical asset. Historically, the best time to overweight gold has been when:<\/p>\n Other asset classes are expensive<\/p>\n<\/li>\n Gold has gone nowhere for extended periods<\/p>\n<\/li>\n<\/ul>\n \u201cToday, gold has beaten equities in almost all emerging markets,\u201d he noted. \u201cIt has become the hero asset. Historically, following the hero hasn\u2019t worked as well as being counter-cyclical.\u201d<\/p>\n In a world shaped by post-2008 money printing, leverage and borrowed future returns, Parekh still believes gold deserves a structural place in portfolios. But that doesn\u2019t mean chasing it after a strong rally.<\/p>\n Asked whether he views crypto like gold, Parekh was honest about his uncertainty. While he studied Bitcoin as early as 2014, he remains unconvinced about the problem it solves.<\/p>\n \u201cI don\u2019t dismiss it,\u201d he said. \u201cBut until crypto becomes a clearly defined and legally recognised asset class in India, I\u2019ve parked the idea.\u201d<\/p>\n He warned against buying any asset purely because prices are rising, a behavioural trap that applies equally to gold, equities and digital assets.<\/p>\n Gold returns in India are amplified by rupee depreciation, which has historically added 3\u20134% annually. Parekh cautioned against assuming this will continue unchanged.<\/p>\n \u201cThere were periods when the rupee actually strengthened,\u201d he said. \u201cOver the next few years, outcomes could be less favourable.\u201d<\/p>\n As India develops, currency depreciation may persist structurally, but likely at a slower pace. This is another reason, he argued, to avoid going overboard on gold allocations today.<\/p>\n Parekh\u2019s conclusion was measured and pragmatic. Gold remains a valuable portfolio component, especially as insurance against uncertainty, leverage and systemic risks. But with valuations closer to fair value, its role should shift back to balance rather than dominance.<\/p>\n \u201cIf both stocks and gold underperform for a while, that\u2019s okay,\u201d he said. \u201cGold\u2019s role is protection, not excitement.\u201d<\/p>\n For investors, the message is timely: gold still belongs in portfolios \u2014 just not as the hero of the moment.<\/p>\n Why Gold\u2019s Recent Rally Has Changed the Case for Overweighting the Yellow Metal After years of strong performance, gold has firmly reasserted itself as a core portfolio component for many investors. Yet, according to Kalpen Parekh, Managing Director and CEO of DSP Mutual Fund, the very strength that made gold attractive over the past few […]<\/p>\n","protected":false},"author":4,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[615],"tags":[],"ppma_author":[1331],"class_list":{"0":"post-19150","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-stock-market-news"}," _eael_post_view_count":0,"authors":[{"term_id":1331,"user_id":4,"is_guest":0,"slug":"sourabh","display_name":"Sourabh Sharma","avatar_url":{"url":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png","url2x":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png"},"0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":""}],"_links":{"self":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/19150","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/comments?post=19150"}],"version-history":[{"count":1,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/19150\/revisions"}],"predecessor-version":[{"id":19152,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/19150\/revisions\/19152"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media\/19151"}],"wp:attachment":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media?parent=19150"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/categories?post=19150"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/tags?post=19150"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/ppma_author?post=19150"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}How DSP Thinks About Gold\u2019s Intrinsic Value<\/h2>\n
Why DSP Has Reduced Gold Exposure<\/h2>\n
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Gold\u2019s Real Role in Indian Portfolios<\/h2>\n
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A Balancing Asset, Not a Hero Trade<\/h2>\n
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Where Crypto Fits \u2014 Or Doesn\u2019t<\/h2>\n
The Currency Question Investors Shouldn\u2019t Ignore<\/h2>\n
A Measured, Not Emotional, Approach to Gold<\/h2>\n
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