What gold does in a portfolio

Gold in a portfolio is a holding whose price moves in its own way, often differently from shares, and that pays no interest while you hold it. It can rise when shares fall. It can also fall for years. So no one can tell you in advance whether now is a good time to buy it, and this article will not try.

What it can do is show you what gold is, what its past prices look like, and which questions decide how much of it fits your own plan.

What does gold do in a portfolio?

Gold is an asset class of its own. An asset class is a kind of investment that behaves in its own way, such as equity (shares), debt (loans such as bonds and deposits), gold, or cash in the bank.

Your portfolio is everything you have invested, looked at together, across every fund, deposit and account. Asset allocation is how your money is split between asset classes. Gold is one of the pieces that split can include.

People add it because its price often moves differently from shares. That is a possibility, not a promise.

A gold fund aims for returns in line with the performance of physical gold in domestic prices, subject to tracking error. Tracking error measures how far the fund's daily returns stray from the gold price over the past year. Gold in India is quoted per 10 grams, and that is the price this article uses.

What does gold not do?

Gold itself pays no interest or dividend, so any gain comes only from a change in its price. A fixed deposit pays interest. A share may pay a dividend, which is cash a company pays out of its profits. Gold pays neither while you hold it.

Its price can also fall for a long time. Going by RBI's yearly averages, gold in 2015-16 was 12% below its 2012-13 level. More on that below.

Can gold lose money? Yes. SEBI makes every fund show a riskometer, the risk label on six levels from Low to Very High. SEBI scores gold by how much its price has swung over the last 15 years. An ETF, or exchange traded fund, is a fund you buy and sell on the stock exchange like a share. HDFC Gold ETF and Tata Gold ETF read High in their factsheets as on 31 August 2026. Most listed gold funds read High on 29 September 2026.

Why can no one tell you if now is a good time to buy gold?

No one can reliably tell in advance when markets will rise or fall. Gold is a market like any other, so the same holds for its price.

A goal date is a reason to move money. A market level is not. If you need money in two years, that date is a fact about your life, and it can change what you hold. A price that looks high or low tells you nothing reliable about what comes next.

The past shows how little prices announce themselves. RBI's yearly average gold price fell three years running after 2012-13. Then it passed that level again only in 2018-19. Nobody who held gold in 2013 knew that in advance. Later, RBI's yearly average rose 56.1% from 2024-25 to 2025-26. That was not known in advance either.

Both are past figures. They say what happened, not what comes next.

How has gold's price moved over the years?

In RBI's yearly averages since 1985-86, gold's average price was lower than the year before in 8 years. The yearly average is one price for the whole year, so it hides falls and rises inside the year.

These are RBI's yearly averages for Mumbai, in rupees per 10 grams, before any costs or tax.

Source: RBI Handbook of Statistics, Table 35.

Read the table in two parts. From 2012-13 to 2015-16 the yearly average fell 12.0%, and it was back above the 2012-13 level only in 2018-19. Six years went by between those two readings.

Then a different stretch. ₹1,00,000 at the 2024-25 yearly average of ₹75,841.87 was worth ₹1,56,142 at the 2025-26 yearly average of ₹1,18,420.90. That is 56.1% more, on yearly averages, before costs and tax.

Neither stretch is a pattern. They are two dated windows from one table.

Does gold protect you when shares fall?

Sometimes, not always. In the two big stock-market falls of recent memory, one gold ETF's NAV rose in each. NAV is the price of one unit of a fund. Those were two past falls, not a rule, and the figures are in our article on how asset allocation affects your portfolio.

The other side is in the table above. Gold has its own long falls. A holding that rose in two past falls and fell for three years running in another stretch cannot be called a shield.

Inflation is the rate at which prices rise over a period, usually a year. The Consumer Price Index, India's main measure of retail inflation, showed prices 4.82% higher in August 2026 than a year earlier (provisional, released on 14 September 2026). Gold's price is not tied to prices in the shops by any rule. Its yearly average has fallen in years when it was held, as the 2013-14 to 2015-16 run shows. Our article on what inflation is explains the measure.

If you are comparing gold with silver, gold or silver, which is better as an investment looks at both.

How do you decide how much gold fits you?

There is no right percentage, because the answer depends on your goals and their dates, what else you hold, and how big a fall you can sit through.

Take them one at a time.

Your goals and their dates. As a goal comes closer, there is less time for a fall to recover before you need the money. This is why some investors move money from equity towards debt in the last few years before a goal, and why SEBI's life cycle funds reduce their equity share as the target date nears. Koshex suggests 5 years or more for gold funds.

What else you hold. Gold is judged as part of the whole mix, not alone. Money in shares, deposits and funds already gives you some mix of risk, and gold changes that mix.

How big a fall you can sit through. Risk tolerance is how big a fall you can sit through without selling, in money and in nerves. Risk capacity is how big a fall your finances can take without hurting a goal, given income, dependants, emergency money and time to the goal. The first is about you. The second is about your numbers. Both matter.

People often ask about age or retirement. The time left to a goal matters more than age itself. Two people of the same age can need their money on very different dates, and the date is what shapes the choice.

The Koshex app runs a risk-profile questionnaire. A risk profile is the label a questionnaire gives you from your answers. It is a starting point, not an instruction.

Once you have chosen a mix, it drifts as prices move. Rebalancing is about keeping risk where you set it. It does not promise a higher return. Our article on how to rebalance your mutual fund portfolio covers it.

How can you hold gold?

You can hold gold through a gold fund (an ETF or a fund of funds), digital gold, physical gold, or Sovereign Gold Bonds that are already issued. The full comparison is in ways to invest in gold.

A gold fund of funds is a mutual fund that holds at least 95% of its money in a gold ETF. Koshex, which holds ARN-154632 as an AMFI-registered distributor, offers gold funds of funds as regular plans. A distributor helps you choose and stays with you afterwards. The category is on our gold funds page.

Koshex also offers digital gold from ₹100, through SafeGold (24K, 99.5%) or MMTC-PAMP. Digital gold is not regulated by SEBI. In November 2025 SEBI said such products are "neither notified as securities nor regulated as commodity derivatives" and that its investor-protection mechanisms do not apply to them. Gold ETFs and gold mutual funds are SEBI-regulated.

On tax, a gold ETF gain is long-term after more than 12 months. A gold fund of funds gain and a digital gold gain are long-term after more than 24 months. A long-term gain is taxed at 12.5%, a short-term gain at your slab rate. For gold ETF and fund of funds units, the purchase date does not change that. Tax on gold has the full rules.

If you would rather build up a gold holding gradually, gold SIPs are covered separately.