Institutional Investors Show Hesitation in Boosting Gold Allocations Despite Market Volatility
Despite a growing interest in gold as a strategic asset to hedge against market volatility and inflation, institutional investors remain hesitant to significantly increase their exposure, according to a report by Incrementum.
GoldInstitutional InvestorsMarket VolatilityInflationInvestmentReal EstateMay 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 interest due to the instability arising out of trade tensions; however, the gold price has been witnessing a fall after a sharp rise witnessed over January-April 2025, in 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 it is lagged, also shows the main sources of demand for gold that have been in place in the first quarter of 2025.
In this regard, investment-related demand for gold that increased by 170 per cent YoY in Q1 2025 underpinned 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 bn worth of gold in April after importing USD 4.5 bn 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 allocations?
Despite growing interest in gold as a strategic asset to hedge against market volatility and inflation, institutional investors remain hesitant due to low historical allocations and a preference for more traditional assets like private equity, real estate, and cash.
What is the current allocation of gold in family office portfolios?
Family offices allocate just one per cent of their portfolios to gold and precious metals, which is on par with niche assets like art and antiques, and well below allocations to private equity, real estate, or even cash.
How has the price of gold performed recently?
Gold prices have seen a sharp rise of 25 per cent over January-April 2025 due to trade tensions, but have since fallen as trade-war anxiety has eased post the 90-day truce between the US and China.
What factors influence the demand for gold in India?
The demand for gold in India is influenced by global prices, the value of the INR against the USD, and the level of jewellery demand, which has eased in response to elevated prices.
How have gold imports changed in India recently?
Gold imports in India have fallen on a sequential basis, with the country importing USD 3.1 bn worth of gold in April after importing USD 4.5 bn worth of gold in March, reflecting an easing in jewellery demand.
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