Gold Gains Traction Amid Market Volatility, but Institutional Investors Remain Cautious

Amid the growing interest in safe-haven assets like gold, which typically acts as a strategic hedge against market volatility and inflation, institutional investors are still hesitant to invest in the yellow metal. According to a report by Liechtenstein-based investment and asset management firm Incrementum, cited by ANI, family offices allocate just 1% of their portfolios to gold and precious metals. This allocation is far behind other asset classes such as private equity, real estate, and cash.

Family offices allocate nearly 1% of their portfolios to gold and precious metals, which is on par with niche assets like art, antiques, and infrastructure. This allocation is significantly lower compared to other asset classes such as private equity, real estate, and cash, the report states after analyzing the global markets.

Gold has gained significant attention in recent months due to the instability arising from trade tensions. However, gold prices fell recently after a sharp rise from January to April 2025, when the yellow metal rallied by 25%. The drop in prices reflects reduced worries regarding the trade war and the safe-haven appeal of the asset, the report states.

Data published by the World Gold Council, despite being delayed, indicates the primary sources of gold demand for the first quarter of 2025. The demand for investment-related gold surged by 170% on a year-on-year basis in the first quarter of 2025, highlighting the rally during this period as investors preferred the yellow metal amid uncertainties over Donald Trump's trade policies and an escalating trade war with China.

With the 90-day pause on sweeping tariffs imposed by China and the US, the demand for gold has reduced, leading to a drop in prices. In Indian markets, the MCX gold prices stood at ₹96,400/10 gm at 11 am on Sunday, May 25, according to the official website. Meanwhile, 24-carat gold was priced at ₹96,860/10 gm, according to data on the Indian Bullion Association (IBA) at 11 am on May 25, while 22-carat gold was priced at ₹88,788/10 gms.

Gold imports have decreased sequentially. In April, the country imported USD 3.1 billion of gold, down from USD 4.5 billion in March, indicating reduced jewellery demand due to high prices.