Institutional Investors Remain Cautious Despite Gold's Rising Popularity
Despite a significant surge in interest around gold as a strategic hedge against market volatility and inflation, institutional investors are maintaining a cautious stance, according to a report by Liechtenstein-based investment firm Incrementum.
GoldInstitutional InvestorsMarket VolatilityInflationInvestmentReal Estate NewsMay 25, 2025
According to an analysis of the global markets, family offices allocate just one per cent of their portfolios to gold and precious metals, putting it on equal footing with niche assets like art, antiques, and infrastructure, and far behind more favoured categories such as private equity, real estate, and even cash.
“Despite growing interest in gold as a strategic asset, institutional allocations remain strikingly low. Family offices allocate just one per cent of their portfolios to gold and precious metals, placing it on par with art and antiques, as well as infrastructure, and well below allocations to private equity, real estate, or even cash,” the report by Incrementum said.
In recent months, gold has seen increased interest due to the instability arising from trade tensions. However, the gold price has been witnessing a fall after a sharp rise witnessed over January-April 2025, during which gold prices had rallied by 25 per cent. The fall in prices reflects reduced anxiety about the trade war and subsequently reduced safe-haven appeal.
Data released from the World Gold Council (WGC), although lagged, also shows the main sources of demand for gold that were in place in the first quarter of 2025. Investment-related demand for gold increased by 170 per cent year-over-year (YoY) in Q1 2025, underpinning the rally in the period as investors turned to the yellow metal in the face of uncertainty about the Trump policy regime and, in particular, about the trade war. As the trade-war anxiety has eased post the 90-day truce between the US and China, the subsequent demand for gold has reduced, which has driven prices lower.
In Indian markets, the price of gold on Saturday reached Rs 98,900.00 for 10 grams. Prices on May 17, as per the prices at MCX, were at Rs 92,480 for 10 grams. Gold prices in Indian markets have traded flat, responding to weakness in global prices and a mild appreciation of the INR against the USD that has taken place over the period.
In volume terms, gold imports have fallen on a sequential basis as the country imported USD 3.1 billion worth of gold in April after importing USD 4.5 billion worth of gold in March, reflecting an easing in jewellery demand that has taken place in response to elevated prices.
Frequently Asked Questions
Why are institutional investors hesitant to increase their gold exposure?
Despite growing interest in gold as a strategic asset, institutional investors remain cautious due to its low allocation in their portfolios, placing it on par with niche assets like art and antiques, and well below allocations to private equity, real estate, or even cash.
What factors have influenced the recent rise and fall in gold prices?
The recent rise in gold prices was driven by increased investment demand due to trade tensions and market uncertainty. However, the fall in prices reflects reduced anxiety about the trade war and subsequently reduced safe-haven appeal.
How has the trade war between the US and China affected gold prices?
The trade war between the US and China initially increased demand for gold as a safe-haven asset, leading to a price rally. However, as the trade-war anxiety eased post the 90-day truce, the demand for gold reduced, driving prices lower.
What is the current state of gold prices in Indian markets?
Gold prices in Indian markets have traded flat, responding to weakness in global prices and a mild appreciation of the INR against the USD. On a recent Saturday, the price of gold reached Rs 98,900.00 for 10 grams.
How have gold imports in India been affected by recent price changes?
Gold imports in India have fallen on a sequential basis as the country imported USD 3.1 billion worth of gold in April after importing USD 4.5 billion worth of gold in March. This reflects an easing in jewellery demand in response to elevated prices.
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