GOLD RUSH: SAFE HAVEN OR OVERHYPED ASSET

INTRODUCTION

“Gold prices surge in India: Investors’ appetite for the precious metal shows no signs of slowing.” Since ancient times gold has been one of the most precious metals. It has been synonymous with wealth and security. From ancient civilisations to modern investors, it has served as a store of value,  a hedge against inflation, and a symbol of financial stability. Due to these reasons people prefer to invest their money in gold. However, with rising inflation, geopolitical tensions, and an uncertain global economy, gold prices are once again making headlines, prompting investors and analysts to debate on its true nature, which has raised the question: Is gold a genuine safe haven in turbulent times, or is it an overhyped asset attracting speculative investments?

CURRENT SCENARIO

In ancient times, gold was one of the main forms of money used by the kings, sultans, and rich traders for trade and storing wealth. However, using gold as currency had many problems. Carrying and storing large amounts of gold was risky because it could be stolen. It was also very heavy, making it hard to transport over long distances. In addition, fake gold coins caused confusion about purity and value. Because of these issues, societies slowly moved from gold to other forms of money - first using cheaper metals like copper, then paper notes, later plastic money such as debit and credit cards, and now digital money.

Even today gold holds great value. As of October 26, 2025, the global price of gold is about $4,110 per ounce, and in India it costs around ₹1,25,600 per 10 grams. The main reasons for this high price are inflation - when prices of goods rise or economies face trouble, people investing in gold because it helps in  protecting their money’s value, central bank purchases - central banks also buy gold to strengthen their reserves which further pushes the gold prices higher , and        global tensions- during wars or political uncertainty investors prefer gold since it is accepted everywhere and remains stable when other markets become risky.

GOLD AS A SAFE HAVEN

Despite the steep rise in the gold prices, it still managed to be the most dominant investment option and occupied a large share in people’s investment portfolio. The key factor for this dominance is its ability to perform well during inflation or economic crisis. For example, during the 2008 global financial crisis, gold prices increased rapidly as investors sought a stable store of value amidst collapsing stock markets and failing banks. Hence, its role as a hedge against currency depreciation and inflation makes it a popular choice for conservative investors who prioritise stability and wealth preservation during uncertain economic times. 

Other factors that explain why gold is regarded as a safe haven include its universal acceptance and its stabilising effect on investment portfolios. Due to its global acceptance it can easily be exchanged during periods of political unrest or financial crisis thus, making it a reliable store of value. Also, holding gold within an investment portfolio provides a significant advantage as gold has low correlation with traditional assets such as stocks and bonds thus making the investment portfolio stable during times of market volatility or economic downturns.  

GOLD AS AN OVERHYPED ASSET

Even though gold has many advantages, some experts think its popularity is often overstated. Unlike stocks or bonds, gold doesn’t earn any regular income such as interest or dividends. The profit made from gold depends mainly on selling it at a higher price, which makes it more speculative. In the short term, gold prices can rise and fall quickly because of changes in interest rates, government policies, or global economic conditions. For example, after reaching its peak during the 2011 financial crisis, gold’s value dropped sharply in the following years, proving that it is not always stable.

Another drawback of investing in gold is the problem of storage and safety. Physical gold must be stored securely, often in vaults or bank lockers, and insured against theft or damage. This can cost investors extra money, sometimes between 1% and 2% of the gold’s value each year, which reduces the overall profits.

Critics also argue that gold may not remain a safe investment forever. New financial options like cryptocurrencies and government backed digital currencies are becoming increasingly popular. As these digital assets gain value and trust, gold’s traditional role as the main store of wealth might weaken. In the future, gold could lose some of its importance as investors shift towards modern, technology based investment options.

Maintaining  Equilibrium Between Both Aspects 

It is evident that gold can serve as a partial hedge and a stabilising component in a diversified investment portfolio. However, one should not solely rely on gold as a store of value. Prudent investors make a moderate amount of investment in gold along with investment in other financial assets which generate interest or dividend and have long term growth potential.

 Moreover, understanding market cycles is crucial. Buying gold during peaks of speculative hype can result in losses, while strategic accumulation during periods of economic uncertainty may offer long-term benefits. Investors should also weigh gold against alternative safe-haven assets, such as government bonds, real estate, or even high-quality dividend-paying stocks.

CONCLUSION

Gold remains as one of the most enduring symbols of wealth and security in human history. Its role as a safe haven is well-documented, particularly during periods of inflation, currency devaluation, and geopolitical turmoil. However, it is not a magical solution immune to market dynamics or investor sentiment. For modern investors, gold is best treated as a component of a diversified portfolio rather than a standalone investment.

While it offers protection and stability, excessive reliance on gold could be risky, particularly if it becomes overhyped by speculation or market trends. Its true worth lies not just in market prices, but in the confidence and security it provides during uncertain times. The gold rush, therefore, is neither purely safe nor entirely overhyped – it is a measured tool, best used wisely in the context of broader financial planning.

By - Suhani Bhati