Gold as an Investment: How Much Should It Be in Your Portfolio?

What role gold actually plays

Gold has historically tended to hold or gain value during periods of economic uncertainty or high inflation, often moving differently from equity markets - which is precisely why it's used as a diversifier rather than a core growth holding. It doesn't generate dividends or interest the way stocks or bonds can.

Common ways to hold it in India

• Physical gold (jewellery, coins): culturally significant, but carries making charges, storage/security concerns, and purity considerations that reduce its efficiency as a pure investment.
• Gold ETFs and gold mutual funds: track the price of gold without physical storage concerns, traded like any other fund/security.
• Sovereign Gold Bonds (SGBs): a government-backed instrument that tracks gold's price and additionally pays a small annual interest. The government discontinued new SGB issuances starting the 2025 Union Budget, citing the rising cost of the scheme as gold prices climbed - the last tranche was subscribed in February 2024, and no new issue calendar has followed since. Existing SGB holders aren't affected: bonds already issued continue to maturity as scheduled, with an exit option available after 5 years on interest payment dates - but new investors can no longer buy fresh SGBs the way they once could.

(SGB discontinuation status checked as of September 2026 - if a new issuance calendar has since been announced, that would supersede this.)

How much is typically recommended

A commonly cited range is 5-15% of a portfolio in gold, as a diversifier - rarely recommended as a dominant holding, since its long-term growth has historically lagged well-diversified equity over long horizons, even though it plays a genuinely useful role during specific downturns.

The takeaway

Gold's job in a portfolio is stability and diversification during uncertainty, not primary growth - size the allocation accordingly rather than treating it as a core wealth-building holding.