Gold Crossed Rs 1 Lakh and Dropped: What Investors Should Make of the Volatility

The Soaring Rise, Sudden Dip, and What It Signals for Your Portfolio

A Psychological Barrier Breached But Not Held
In a dramatic yet brief moment, gold prices in India crossed the Rs 1 lakh mark per 10 grams, touching an all-time high and breaking a psychological barrier that once seemed distant. However, the euphoria was short-lived as prices soon pulled back, leaving investors and consumers wondering: Was that the peak, or just a pause in a longer rally?

The move sparked intense debate among analysts, jewellers, and policymakers. Veteran banker Uday Kotak notably praised Indian households’ long-standing faith in gold, calling the Indian housewife 'the smartest fund manager' for her quiet yet strategic gold accumulation over decades.

Let’s unpack what caused this historic surge, why prices cooled off, and how you should think about gold now both as an asset and a signal of broader economic trends.

The Rise of Gold: A Quick Recap
Gold has always had a deep cultural and financial significance in India whether as jewellery, a family heirloom, or an investment. Over the years, prices have climbed steadily, influenced by inflation, currency movements, and global trends. But the recent surge has been particularly sharp.
  *   In 2010, gold was around Rs 18,000 per 10 grams.
  *   By 2020, it reached Rs 50,000.
  *   In 2025, it has now crossed Rs 1,00,000, a 100 per cent jump in just five years.

Indian households collectively own over 25,000 tonnes of gold around 11 per cent of the world’s total gold holdings making Indians the largest private holders of gold globally. This underscores how important gold remains in our economy and culture.

Why Gold Soared to Rs 1 Lakh
Global Geopolitical Tensions: Conflicts in Eastern Europe and the Middle East drove up demand for safe-haven assets. Gold, being apolitical and universally accepted, became the go-to option amid rising global instability.

Inflation and Loose Monetary Policy: Major central banks, especially the US Federal Reserve, expanded their balance sheets aggressively during and post-COVID. This led to devaluation concerns around fiat currencies, prompting a move to hard assets like gold.

Weakening Rupee: With over 90 per cent of gold being imported, a declining rupee directly pushes up gold prices for Indian consumers. This currency movement amplified the price spike.

Central Banks Hoarding Gold: From China to Turkey, central banks have been accumulating gold reserves to hedge against currency risk. This has added a floor to global demand.

Indian Retail Demand: Festivals like Akshaya Tritiya and the ongoing wedding season sustained local demand, despite high prices. Interestingly, many consumers adapted by shifting to lighter designs or smaller quantities.

Why Gold Didn’t Stay at Rs 1 lakh
After touching Rs 1 lakh, profit booking by traders, a slight strengthening of the US dollar and easing geopolitical tensions led to a price correction. In commodities, such corrections are common after euphoric highs.

What It Means for You?
Consumers: The spike and subsequent drop have caused confusion among jewellery buyers. Middle-class households, especially those planning weddings, now face tougher budgeting calls.

Key Tip: Avoid buying jewellery purely as an investment. Making charges, taxes, and embedded stones dilute resale value. Gold jewellery is a consumption asset not a trading vehicle.

Investors: Those who invested early through Sovereign Gold Bonds, ETFs, or digital gold have seen strong returns. Gold has again proven its role as a hedge during uncertainty. However, entering at or near Rs 1 lakh may leave recent buyers with near-term paper losses. Think of gold not as a 'return maximizer' but as a 'risk reducer.' Its true value is in portfolio stability.

The Economy: A surge in gold imports at higher prices can widen the trade deficit, putting pressure on the rupee. But on the flip side, higher gold prices increase the net worth of Indian households, acting as an informal safety net.

Should You Still Buy Gold?
Pros:
Hedge against inflation and currency devaluation
Strong demand base (both retail and institutional)
Geopolitical uncertainties remain unresolved

Cons:
Prices have corrected from the peak; volatility remains high
Long-term returns historically lag equities. Gold has returned approximately 8–9 per cent CAGR over 15 years vs equities, approximately 12–14 per cent
Entry cost is elevated

Key Tip: Gold remains valuable, but don’t chase price spikes. Accumulate slowly, with a clear allocation plan.

Smart Portfolio Allocation in Uncertain Times
With market uncertainty and rising asset prices, diversification is key. If you're moderately risk-tolerant and want to keep potential losses under 10 per cent. This diversified mix ensures that you’re protected against equity market volatility, interest rate changes and currency depreciation while benefiting from long-term capital growth. Consider this asset allocation:

Is Rs 1 Lakh the Ceiling or Just a Milestone?
Historically, every major gold rally has been followed by a cooling-off period or sideways movement. What comes next depends on the trajectory of global interest rates, inflation, and geopolitical stability. As an investor, don’t get swayed by headlines. Stay calm, stay diversified, and match your gold exposure to your long-term goals not short-term emotions.

Final Thoughts
Gold’s recent price action serves as a reminder of how quickly sentiment can shift in today’s interconnected world. But it also reaffirms the metal’s status as a timeless financial anchor. Whether you’re a first-time buyer, seasoned investor, or simply watching from the sidelines, treat gold as a strategic asset, not a speculative one. Its glitter lies not just in price, but in purpose.

Disclaimer: The article is for informational purposes only and not investment advice.