Indian Stock Market Declines 9% from Peak, Raising Questions about Gold Investment Strategies

Gold Exposure in Portfolios: A Growing Debate

The conventional investment rule of allocating 80-85% of a portfolio to equities and 15-20% to gold is being reevaluated by investors. The Indian stock market has experienced a decline of nearly 9% from its record high of 86,159, and the ongoing US-Iran war, surge in crude oil prices, and rupee fall against the dollar indicate potential market corrections.

Gold's Upward Trajectory

Gold prices are poised for healthy gains due to the conflict in the Middle East and its potential impact on global growth-inflation dynamics. The sharp rise in crude oil prices will likely support gold prices, while the aggressive buying of gold by the People's Bank of China (PBOC), which has acquired over 2,300 tons of gold as of February 2026, will also provide support.

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Global Monetary Order Shift

Experts note a structural pivot in the global monetary order, with gold emerging as the premier sanction-resistant sovereign reserve. Unlike fiat-based instruments, gold carries zero counterparty risk and provides absolute financial autonomy. China's accumulation of physical gold and reduction in US Treasury exposure signal a fundamental loss of confidence in paper-denominated assets.

Increasing Gold Exposure

Many experts believe the current market structure favors increasing gold exposure beyond 20%. Renisha Chainani, head of research at Augmont, suggests raising gold allocation slightly above 20% may improve resilience, particularly in a portfolio heavily exposed to equities and global risk assets. A balanced approach would be to gradually increase allocation on corrections rather than making aggressive lump-sum shifts.

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Recommended Allocation

Archit Doshi, Senior Vice President at PL AMC, recommends considering 20-25% of investible capital in gold, given the current macroeconomic paradigm. Joseph Thomas, Head of Research at Emkay Wealth, notes that the buying of gold by China will offer good support to gold prices, while a more sustained support is likely to come from expected depreciation in the US dollar against currency majors.