Amid these discussions, Sunil Subramaniam, Managing Director of Sundaram Mutual Fund, offered a clear-eyed assessment of gold’s current standing in the asset landscape during an interaction with ET Now.
He shared his perspective on the role of gold in today’s asset allocation strategies—particularly at a time when gold prices have risen sharply. Despite trading at elevated levels, Subramaniam emphasized that gold is “costly, but not expensive,” arguing that its current price does not necessarily signal overvaluation.
Addressing concerns around valuation, Subramaniam clarified that the price rise should be seen in context. “It has just gone up. It is costly, but it is not expensive,” he said. Drawing a parallel with equity markets, he added, “You take a 12% compounding—if the Sensex is 80,000 today, in 18 years it will be 6,40,000. Now, would you say the Sensex at 6 lakhs is too expensive? No.”
He argued that gold, like equities, reflects underlying economic growth. “It is a natural part of the nominal GDP growth of the world getting reflected in stock prices, and gold is an alternative asset class,” he said. Subramaniam also suggested that gold is now playing a role similar to what the dollar once did: “Gold is the new reserve currency. It is replacing the dollar.”
He highlighted gold’s historical negative correlation with equities, noting that it typically performed well during periods of equity underperformance. “Historically, gold had a negative correlation to equities,” he explained.However, the current rally in gold, according to Subramaniam, is being driven by global currency realignment. “Fundamentally, why gold is moving is de-dollarisation,” he stated, citing that large global economies—including Japan and China—are reducing their dollar exposure due to geopolitical and economic risks.“China has $770 billion in dollar assets. They are trying to reduce their risk… they are buying more gold,” he noted. India, too, is following a similar path. “The RBI has been among the higher purchasers of gold this year in terms of allocation,” he said.
This shift, Subramaniam believes, reinforces gold’s role as “an alternative to sovereign” holdings.
Commenting on the broader implications for the U.S. dollar, he said, “It does not look like a BRICS counter-currency to the dollar is going to come up,” suggesting that while the dollar’s dominance is being challenged, no clear alternative has yet emerged.
He reiterated his belief in maintaining a balanced gold allocation strategy: “I am not an expert on gold, but to me, the best way is to keep a 10% to 15% allocation to gold at all times—that is the best way to play it,” he said.
Such an approach, he concluded, ensures that investors are neither “unduly happy nor unduly sad when gold goes up.”
Also read: Gold dazzles, but buyers dwindle: Price surge shrinks bling appetite
