Gold: A strategic asset for Stability & Diversification

Gold has long been regarded as a store of value and a reliable investment during times of uncertainty. Its universal acceptance, limited supply and diverse sources of demand make it a unique asset class that can play an important role in building resilient investment portfolios.

Why do investors consider Gold?

Gold has several distinctive characteristics that set it apart from other asset classes.

First, it is globally recognised and accepted, making it highly liquid and tradable across markets. Unlike many financial assets, gold also has a finite supply, which supports its long-term value.

Gold is widely viewed as a store of value, helping preserve purchasing power over time. It also acts as an inflation hedge, offering protection when the purchasing power of currencies declines.

Importantly, gold can also serve as a safe haven asset during periods of market stress. In times of geopolitical tensions, economic uncertainty or financial market volatility, investors often increase allocations to gold.

Another key advantage is diversification. Because gold’s performance can help reduce overall portfolio volatility.

Limited Supply and Strong Global Demand

According to global estimates, the total above-ground gold stock is approximately 219,891 tonnes.

The distribution of this stock highlights the widespread use of gold across sectors:

Jewellery: ~97,645 tonnes (44%)

Bars and coins including gold ETFs: ~50,978 tonnes (23%)

Central banks: ~38,666 tonnes (18%)

Other uses: ~32,602 tonnes (15%)

This diverse ownership base reflects the multiple roles gold plays in both consumer markets and the financial system. With supply relatively constrained, long-term demand dynamics continue to support the metal’s relevance as an investment asset.

Source: World Gold Council, Metals Focus, Refinitiv GFMS, Latest available data as on 31 December 2025, Estimates for reserves and resources can vary, *End-2024 estimates Reserves are the portion of an ore deposit that can be economically extracted. Past performance may or may not be sustained in future and is not a guarantee of any future returns

Demand across Economic Cycles

Gold demand is supported by several key segments.

During economic expansion, consumer demand for jewellery tends to increase, contributing to gold consumption. Jewellery accounts for roughly 29% of gold demand globally, reflecting strong cultural and consumption patterns across many economies.

At the same time, technology demand, which accounts for around 6%, supports gold usage in electronics and advanced industrial applications.

In periods of economic uncertainty, investment demand becomes a major driver. Investment demand accounts for roughly 43%, as investors turn to gold to protect portfolios during volatile market conditions.

Central banks, which account for about 21% of demand, also play an important role in supporting gold’s strategic importance as a reserve asset.

Source: World Gold Council, ICE Benchmark Administration, Metals Focus, Bloomberg, HSBC Mutual Fund, Latest available data as on 28 Feb 2026, *Based on 10-year average annual net demand estimates ending Q4 2025. Includes: jewellery and technology net of recycling, in addition to bars & coins, ETFs and central bank demand, which are historically reported on a net basis. It excludes over-the-counter demand owing to limitations in data availability. Figures may not add to 100% due to rounding. US dollar value computed using the 2025 annual average LBMA Gold Price PM of US$3,431.5/oz. **Net jewellery and technology demand computed assuming 90% of annual recycling comes from jewellery and 10% from technology.

Past performance may or may not be sustained in future and is not a guarantee of any future returns.

Gold’s performance in uncertain times

Historically, gold has often delivered strong performance during periods of global stress.

For example, during the Coronavirus-led global lockdown in 2020, gold delivered over 28% calendar year returns as investors sought stability amid widespread economic disruptions.

Similarly, geopolitical tensions and market volatility have continued to support gold’s performance in recent years.

Calendar year returns for gold in recent years highlight this trend:

2019: 23.8%

2020: 28.0%

2021: -4.2%

2022: 13.9%

2023: 15.4%

2024: 20.6%

2025: 74.7%

These trends suggest that gold can play an important role in strengthening portfolios during uncertain market environments.

Source: Crisil MFI, HSBC Mutual Fund, Data as on 31 January 2026, Gold represented by Prices of Gold. Past performance may or may not be sustained in future and is not a guarantee of any future returns.

Accessing Gold Through HSBC Gold ETF

For investors looking to gain exposure to gold without holding physical metal, the HSBC Gold ETF offers a convenient investment avenue. The scheme is an open-ended exchange traded fund designed to track domestic prices of gold, subject to tracking error.

Key Features

Digital ownership

Units are held in dematerialised (demat) form, enabling secure and convenient ownership.

High liquidity

The ETF can be bought and sold on stock exchanges such as NSE and BSE during market hours.

Continuous trading post listing

Investors can buy or redeem units on exchanges on a continuous basis once the ETF is listed.

Investment strategy

The scheme will invest at least 95% of its assets in gold or gold-related instruments, while up to 5% may be allocated to money market instruments.

No exit load

The scheme does not levy an exit load.

Minimum investment

During the NFO period, investments can begin from ₹5,000 and in multiples of ₹1 thereafter.

Conclusion: Building Portfolio Resilience

In a world shaped by geopolitical developments, inflation cycles and economic uncertainty, gold continues to demonstrate its value as a strategic asset.

By offering diversification, liquidity and protection during volatile periods, gold can help investors build more balanced and resilient portfolios over the long term.

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