Lately, there has been a noticeable surge in interest in investing in gold, silver, and even copper. Individuals who previously had little or no exposure to these commodities are now reaching out for investment advice. Much of this interest appears to be driven by recent price performance, market chatter, hearsay, and discussions on social media.
Historically, gold has been viewed as an inflation hedge and as an asset class with low correlation to equities, making it a potential diversifier in a portfolio. However, gold remains a non-productive asset. The renewed interest in gold can be attributed to factors such as the increasing use of the US dollar as a foreign policy tool, prompting some countries to reduce exposure to US Treasuries and increase gold holdings. Additionally, geopolitical tensions such as the Russia-Ukraine conflict, the Israel-Palestine war, and instability in Iran have added to the appeal of gold as a safe haven. That said, these factors alone do not reasonably justify a near 100% rise in gold prices within a year. After such sharp run up, the law of averages suggests that prices may eventually stabilise or correct.
Despite this, enthusiasm for gold remains strong. While geopolitical risks and de-dollarization trends carry some merit, they do not justify significantly increasing exposure at a time when prices have already risen substantially. Fear of Missing Out (FOMO) is clearly influencing investor behaviour.
A similar trend is emerging in silver and, more recently, copper. The common narrative is that the growth of AI and electric vehicles will drive unprecedented demand for these commodities, with aggressive projections being circulated.
While these arguments may sound plausible, the concern lies in the pace and intensity of capital chasing these themes. Many companies and investors are rushing into AI largely due to FOMO. Although AI has genuine long-term potential and can add significant value to society, periods of excess are often followed by consolidation and shake-ups. Likewise, while EV adoption is growing, a full transition to electric mobility will take time.
Avoid chasing momentum or succumbing to herd mentality. Steer clear of emotionally driven investment decisions. Market timing is challenging and often counterproductive; a disciplined, systematic approach to investing tends to be more effective. Above all, ensure that investments align with your financial goals and risk appetite.
Disclaimer
The writer is a SEBI Registered Adviser and Founder of FinMyn (https://finmyn.com). He provides Fee-Only Financial Planning and Investment Advisory services.
He has advised many clients in India, the US, the Middle East, Southeast Asia, Europe and Australia.
To know more about him, click on https://finmyn.com/about/.