Backed by decades of positive INR returns, is gold set to shine brighter in 2025?

Time of India

02-05-2025

Gold
is once again commanding investor attention as global macro uncertainties, currency fluctuations, and central bank purchases continue to strengthen its position as a reliable safe-haven asset. According to recent market analysis and expert commentary, the yellow metal has not only delivered consistent outperformance over the long term but is now poised for another strong year in 2025.
Interestingly, gold (in INR terms), has not had a negative decade in INR versus two decades of negative returns for the USD, according to a report by Capitalmind Financial Services.
Further, gold's history reveals its dual nature: an enduring store of value and a volatile investment prone to long drawdowns.
'Gold has been a relatively safer asset for Indian investors on account of the Rupee's depreciation versus the USD,' said Anoop Vijaykumar, Head of Research at Capitalmind, highlighting that gold's role in modern portfolios should be part of a strategic, systematic allocation rather than reactive FOMO-driven decisions.
The divergence between gold's performance in INR versus USD terms has been stark. Capitalmind's research shows that even in periods where USD returns were negative (e.g., 1980s, 1990s), INR returns remained positive, thanks largely to the rupee's depreciation.
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For example, during the 1990s, gold posted a -28% return in USD, but a +85% return in INR. From 1990 to 2002, the USD return on gold was frequently negative, whereas INR returns remained largely in the green. As of 2025, it takes more than 80 INR to buy 1 USD, up from just 8 INR in 1973, highlighting the importance of currency hedging for Indian investors.
ETMarkets.com
(Source: Capitalmind Financial Services)
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Gold's increasing demand
Nippon India Mutual Fund also shared certain data points that show the yellow metal's growing demand among investors.
The data highlights that the industry turnover has tripled since 2018, comparing the prices of the metal on the occasion of Akshaya Tritiya each year. The turnover has increased to Rs 32,541 lakhs in 2025, up from Rs 3,007 lakhs in 2018.
Meanwhile, the Nippon Gold ETF accounted for 40–63% of total industry turnover in most years. Further, in 2025, Nippon's volume was also 21 times the industry average (excluding its own).
Volumes spike annually around Akshaya Tritiya, also reflecting a shift in consumer behavior — from buying physical gold to investing in digital and paper gold formats like ETFs.
Gold outlook for 2025
As per Capitalmind's study, gold is expected to approach USD 3,300 per ounce in 2025, supported by slowing U.S. growth, rising fiscal deficits, and ongoing geopolitical instability. This would mark a sharp rise from the $800/oz levels seen during uncertain periods in 2024.
Key drivers supporting this outlook include:
Trade War Escalation: U.S. tariffs on Chinese goods (145%) and retaliatory tariffs from China (125%) have increased safe-haven demand.
Currency Hedging: Depreciation of the yuan and other emerging market currencies has accelerated gold buying.
According to Manoj Kumar Arora, Managing Director at
Almondz Global
, 'Gold as a commodity is expected to perform well in 2025 despite gold posting a 30% return since last year.'
He added that, 'Gold has posted a 15% CAGR return since 2001 and has outperformed inflation by more than 2% to 4% since 1995.'
Arora also highlighted continued strong central bank buying as a structural pillar for gold's bullish trend. 'As of March 2025, China holds 2,292 tons while RBI holdings reached a record 879 tons,' he stated, noting that global central banks have been adding 1,000 tons of gold annually over the past three years.
'We believe tariff-driven recession and stagflation risks are forecasted to continue for gold's structural bull run,' Arora added. He recommends investors consider Gold ETFs as a low-cost investment avenue in this environment.
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With elevated central bank demand, tariff-related uncertainties, a depreciating rupee, and geopolitical risks on the horizon, experts maintain a constructive outlook on gold for 2025 and beyond. As history shows, even a modest gold allocation can enhance portfolio stability, especially when markets are in flux.
As Capitalmind's report summarises: Portfolios with just a 5–10% allocation to gold often achieve better risk-adjusted returns than equity-only portfolios.