Gold has not necessarily played its traditional defensive role consistently over the past year. Despite significant global uncertainty around tariffs, wars, geopolitical tensions and policy changes, gold did not perform as strongly during some of these periods as one would typically expect from a safe-haven asset. According to Anand K Rathi, co-founder of MIRA Money, one reason is that gold had already seen a significant run-up in the preceding year, meaning much of the positive impact from these uncertainties was already reflected in prices.
Gold remains a strong defensive asset in the long term
However, Rathi feels the longer-term case for gold as a defensive and diversification asset remains intact.
“In the short term, the recent sharp rise in gold prices has been caused by things like worsening employment data, expectations about US interest rates, a weaker dollar and lower yields. When the dollar weakens and bond rates fall, gold tends to become more appealing,” he added.
Gold market trends in India
Additionally, the Indian market reveals that investors are still putting money into gold, even tho prices are high. Gold prices on the MCX averaged Rs 1,51,108 per 10 grams in the first quarter of 2026. This was up 81 per cent year-over-year and 20 per cent quarter-over-quarter. During the quarter, the price of 10 grams of gold hit a record high of Rs 1,75,231. Even though gold prices were high, Indian demand for investments rose 54 per cent year over year to 82 tons, more than the 66 tons of demand for jewellery.
Gold ETFs are another way to see the shift toward gold as an investment. It took 20 tons of gold ETFs to meet net demand in the first quarter of 2026, up from 7 tons in the first quarter of 2025. ETF holdings increased to 115 tonnes, while AUM rose 191 per cent YoY to Rs 1.7 lakh crore. Bar and coin demand also increased 34 per cent YoY to 62 tonnes.
Gold’s price volatility
However, experts say investors should not interpret gold’s defensive role as a guarantee of a linear rise in prices. “Domestic gold prices corrected by around 10 per cent in June to nearly Rs 1,41,000 per 10 grams, even as Gold ETF inflows strengthened. In this case, it shows that gold prices can go down in meaningful ways even when the overall economy is uncertain,” he added.
Gold as a portfolio safe haven
Experts believe gold remains one of the strongest portfolio diversifiers over the longer term, particularly amid large fiscal deficits globally, currency uncertainty, and concerns about dependence on the US dollar.
“Its value lies less in delivering a steady one-way return and more in providing a hedge when traditional financial assets or currencies come under pressure. Therefore, gold can continue to perform a defensive role for Indian investors, but the performance is unlikely to be linear. At elevated valuations, investors should look at gold primarily as a strategic diversification and risk-management allocation rather than simply chase its recent momentum,” Rathi concluded.
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(This article is for informational purposes only and should not be construed as investment, financial, or other advice.
