Gold investment in 2026: Why 10% may be the sweet spot for your portfolio

In 2026, gold is back in the spotlight. Investors are once again using the yellow metal as a portfolio hedge in the face of ongoing market volatility, fluctuating interest rates, and worldwide uncertainty.

Before increasing your allocation, it’s important to understand gold’s role in a portfolio.

Gold often behaves differently from debt and equities, particularly in times of high inflation, currency volatility, or global uncertainty.

"When financial markets correct sharply, gold has historically shown the ability to hold value better. This difference in behaviour helps reduce overall portfolio volatility and smooth the investment journey," said Shweta Shastri, a Certified Financial Planner (CFP).

The remaining allocation between equity and debt should depend on individual risk appetite. An aggressive investor may hold a higher proportion in equity and a smaller allocation to debt, while a conservative investor may prefer lower equity and higher debt exposure, but what about gold then?

“Gold should account for around 10% of a portfolio. Historically, this has been considered a balanced allocation, enough to protect volatility without compromising long-term wealth creation,” Shastri said.

Why not more allocation?

Allocating more than 10% to gold does not proportionately improve portfolio stability but can dilute long-term returns.

Historically, long-term wealth creation has largely come from assets like equity. Allocating too much to gold may slow down compounding.

"So, in managing a portfolio, the real objective is not just higher returns, but the ability to stay invested through volatile phases. Staying in the journey matters more than reacting to every market movement. A balanced allocation, including gold, supports emotional discipline and long-term consistency," said Shweta.

A similar asset-allocation-based approach is echoed by Satish Dondapati of Kotak Mutual Fund.

Investors should approach these investments with a long-term perspective rather than aiming for short-term gains. Additionally, investing gradually through staggered contributions is preferable to making a single lump-sum investment.