Why DSP Mutual Fund says investors should ride gold’s rally for now

Gold may continue its bull run despite hitting all-time high last year, as central banks ramp up purchases and global reserves tilt away from the dollar, according to DSP Mutual Fund’s latest Netra Report.The report highlights that central banks have bought nearly 1,000 tonnes of gold each year since 2022, absorbing more than a quarter of annual global mining supply. DSP warns that the gold market is too shallow to handle large reserve shifts smoothly — even a 5% move from total forex reserves into gold could fuel a sustained rally.

With few credible alternatives, gold has emerged as the main non-dollar reserve asset. The euro remains exposed to fiscal risks, the yuan lacks market depth, and other currencies are too small to attract meaningful flows, DSP notes.

For investors, the report suggests sticking with the trend until gold prices approach an estimated fair value band of $3,130–$4,400 per ounce, calculated using money supply data and historical gold-to-silver ratios.Silver, by contrast, remains well below its previous peaks, with a potential range of $52–$74 per ounce.

“Gold and silver do not have a common intrinsic value yardstick. Therefore, in bull markets, it is logical to let the allocation continue until the trend continues on the upside without calling for market tops,” the Netra report says.

DSP advises reducing allocations only once prices approach the higher end of its range or if the uptrend weakens. India, which holds about 15% of the world’s mined gold, could see a direct impact on household wealth if the rally sustains.