Dhanteras haul: A Rs 1 lakh gold SIP over 20 years would have yielded Rs 1.08 crore fortune

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We’re almost through 2025, and its that time of the year when the skies light up, the glow of lamps outshines the stars, and the air is filled with joy and celebration. It’s the auspicious time of Diwali. Gold has captured headlines this year recording an extraordinary run.

For Indians the gleam of gold is more than just investment; it symbolises prosperity and hope for a brighter, abundant future. While gold is globally seen as a hedge against inflation and market volatility, in India, it has always played a dual role: a symbol of heritage and a trusted financial asset. This connection is most visible during Dhanteras, the biggest gold buying day. For many households, purchasing gold on this day is both a ritual for good fortune and a conscious step toward financial security.

Indians have been quietly doing systematic investment in gold, even before the SIP’s came into light. From Dhanteras and Diwali to Akshaya Tritiya, and even regional harvest festivals, every occasion becomes an opportunity to bring home a little more gold.  This method has proved to be a an effective investment strategy with discipline at its core.

How India’s Gold SIP has delivered – One Dhanteras at a time…

If a person had started SIP in gold by investing Rs 1,00,000 every Dhanteras starting 2005, the total of Rs 20 lakh over 20 years would have grown to a corpus of over Rs 1.08 crore. An accumulation of around 950 grams of gold, which started as a first purchase of 145 grams. An excellent example of discipled investing and wealth accumulation.

Also read | Gold shines this Dhanteras with 55% annual return; here’s tracking its 5-year journey

At these elevated levels, should investors still buy gold?

Since the beginning of 2025, gold has made 39 new all-time highs, so far. However, it is important to evaluate the underlying conditions and the situation of key drivers fuelling the rally in gold.

With a weakening labour market and rising inflation, the US Federal Reserve finds itself in a challenging position. After announcing a 25 basis points rate cut in September, chair Jerome Powell has indicated the possibility of two more cuts in the remaining months of 2025. While these decisions are framed as risk-management measures, rising federal debt and widening fiscal deficits continue to reinforce gold’s role as a hedge against the deteriorating US macroeconomic fundamentals.

Additionally, the official unemployment data from the Bureau of Labor Statistics was delayed due to a government shutdown, causing uncertainty and panic among investors. Should labour market conditions worsen or financial market stress intensify, the Federal Reserve may be forced to adopt more aggressive rate cuts or easing measures, likely providing further support to gold prices.

The macroeconomic impact of the Trump-era tariffs, long anticipated, is now becoming evident inching up to 2.9 percent. In response, the Federal has revised its inflation outlook upward, acknowledging the tangible effects of these tariffs and broader trade policies. This combination of rising inflation and a weakening labour market has heightened recession concerns and contributed to a steepening yield curve, creating a fundamentally supportive environment for gold.

Amid these concerns , central banks have turned to gold to reduce their reliance on the dollar as a reserve currency. The dollar’s share of global reserves has declined to around 42 percent, while gold’s share has been rising  significantly. Central banks from major economies such as China, India and Poland have been at the forefront of this accumulation, substantially increasing their gold reserves. Their purchases have been a driver of gold prices. Every 1 percent shift of dollar reserves to gold, increases demand by approximately 530 tonnes at $4,000 an ounce level.

With gold prices at record highs, a correction or consolidation cannot be ruled out. With fundamentals intact, it took a liquidity freeze to create a sell off in gold in 2008, it could be any factor that can trigger a correction. The easing of geopolitical risks — such as signing of a peace treaty between Israel and Hamas — could also lead to a near-term correction in gold. Such market adjustments, however, should be viewed as temporary fluctuations rather than a reversal of the long-term trend.

The structural factors underpinning gold’s appeal remain firmly intact. Persistent inflationary pressures, global economic uncertainties, structural deficit and debt concerns and shifts in central bank reserve policies undermining dollar continue to create a favourable environment for gold as a strategic asset. The time-tested strategy of gradually building gold allocations over time has consistently proven to be a prudent approach, enhancing portfolio stability and preserving wealth.

While short-term volatility is inevitable, the enduring fundamentals supporting gold suggest that its value will continue to grow, reinforcing its role as a vital component of a balanced investment portfolio.

The writer is the Chief Investment Officer at Quantum AMC.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.