Gold Risk-Reward Is Unattractive To Invest Now! DSP AMC Explains Why

Gold prices have delivered one of the sharpest and most emotionally charged rallies in modern market history. At current levels, DSP Asset Managers (DSP AMC) believes investors need to step back from narratives, momentum, and fear of missing out, and return to discipline. “Since these assets are hard to value, they do not have an upper limit when they rally,” DSP notes, warning that commodities often form “panic tops and have the highest real-time consensus optimism.” That combination, the fund house argues, is precisely what makes this phase risky rather than attractive.

Investors who maintained a fixed allocation to gold benefited fully from the move. But for those using any valuation or framework, partial or full profit-taking would have been the rational response over the last six months. Crucially, DSP stresses that at peaks, “there is absolutely no data whatsoever to believe that prices could head lower anytime soon”, a hallmark of late-cycle behaviour.

Don’t Be Overweight in Gold and Silver

DSP’s first and clearest message is restraint. “At this price, it is not possible to calculate risk-reward for precious metals,” the note says. When risk-reward cannot be framed even imperfectly, the asset no longer qualifies as an attractive opportunity.

For investors who had no allocation before 2024, DSP is unequivocal: “This is not the price to experiment with a new asset class.” And for those who entered over the past year or so, the advice is to lock in gains and step aside. “If you bought over the past year and a half, this is the time to take profits and be a fence sitter. ”New allocations, if any, should be symbolic rather than meaningful. DSP allows room for behavioural reality, suggesting that investors overwhelmed by FOMO may consider “a token SIP,” but only if the position is small enough that “it doesn’t hurt your portfolio if precious metal prices see a drawdown.

”The broader principle, according to DSP, is cyclical humility. “All assets are cyclical. There will be opportunities to buy Gold & Silver again, but it is not available now.”

Central Banks Are Stepping Back, While Momentum Chasers Chase Gold

One of the most important shifts DSP highlights is in market leadership. Central banks were the primary engine of the gold bull market, a factor DSP flagged as early as 2022. But that support is no longer accelerating. “With this change in the largest buyers, the Gold bull market leadership has shifted from CBs to ETFs,” DSP explains. And that matters, because “ETFs are momentum chasers”.

Their demand rises after strong past returns rather than before future ones. This behavioural switch is visible in the data. After years of ETF selling, renewed buying only emerged once gold prices had already doubled. At the same time, central bank purchases slowed materially, marking the first year below 1,000 tons since 2022. DSP cautions that sharp surges in investment demand tend to self-reverse. “Such large increases in investment demand are seldom repeated in the following year,” the note says, adding that volatility often turns recent buyers into sellers, undermining sustained momentum.

When To Allocate to Gold and Silver?

DSP’s framework for re-entry is grounded in margin of safety, not conviction stories. At present, “Gold continues to trade above the upper range of its theoretical price,” leaving little room for mathematically defensible upside. Central banks themselves are now facing constraints. “How much of a non-yield asset would central banks hold is now questionable,” DSP observes, especially with real rates remaining high and inflation benign, conditions historically unfavourable for gold. Silver, meanwhile, does not offer the relative value cushion investors might expect.

“An overweight stance makes sense at a Gold-Silver Ratio of between 80 and 100, and not at 45 to 60,” DSP reiterates. While recent corrections have narrowed overvaluation, risk-reward remains difficult to justify. The conclusion is deliberately unexciting, but disciplined. “This is the time to be neutral on these assets, not overweight.” DSP urges investors to resist “conspiracy theories and world-changing narratives” and remember that “price makes the news, not value,” it says. The best opportunities ahead, DSP argues, will not be where excitement is loudest, but where patience is hardest. For gold and silver, that moment has not arrived yet.