QARI

4 July 2026

Every few months, I get the same call. This particular phone call came in the last week of January when gold printed at $5,500 per ounce and a client asked: “Should we be in gold?”

On 30 June it traded at $3,955 — down 29.7% from that print, the worst drawdown since 2013. From 29 January to 2 February 2026, it fell more than 18%, its biggest three-day loss in thirteen years.

In terms of bond math, that 18% loss is a ten-year GSec absorbing a 275 basis point shock, something that has never happened. A 30% drawdown is what a corporate bond does when the issuer stops paying, and even then the bond may have paid a coupon and leave a recovery claim. Gold leaves a locker receipt.

Gold has no place in a retirees portfolio. For that matter, it has no place in anyone’s portfolio.

Investment Committee

Let’s run it past the investment committee. Reciting the facts: Gold has no coupon, no maturity, no issuer, no covenant, no seniority, no recovery and negative carry. All the value is terminal value, a belief someone will pay more for it someday.

Warren Buffett has never hesitated to express his contempt for gold, even when his father was an ardent gold enthusiast. His point is our point: gold does not produce anything, unlike farmland or any other economic asset.

Gold has negative carry and bearer risk

Custody, insurance, ETF fees of 25–40bp, locker rent. On jewellery, it imposes a making charge of 8–25%, plus GST, plus wastage. That is a 25% haircut on purchase. We fight over half a basis point of NDS-OM slippage and then accept a 2,500 basis point bid-ask because that necklace is pretty.

Then there is theft. Gold is a bearer instrument with no ISIN, no depository and no stop-transfer. And do not forget Executive Order 6102 of 1933 by which US President Roosevelt criminalised private gold holding at $20.67/oz and then revalued it to $35/oz. What we mistake for “no counterparty risk” has one very large counterparty: the state that permits you to keep it.

Gold may not be scarce for long

Gold is scarce in the earth’s crust. Whether it is scarce in the accessible universe is another matter. Neutron-star mergers manufacture heavy elements, and startups are already planning to mine asteroids. We price long-dated bonds on terminal assumptions every day, and gold’s entire value rests on one. If your only immutable view is that they cannot get more gold, you are short an unhedgeable technology.

Veblen’s lawn in India

In The Theory of the Leisure Class, 1899, Veblen saw the residential lawn as the prime symbol of waste and luxury. The analogy to gold is striking. Anyone can farm; only the rich can afford to waste good land on lawn. Gold is that lawn, and the utility is pride. 

India’s tragedy is that it is the poor man who wants that pride the most. He parks his savings in 22-carat jewelry at a 20% entry haircut and earns 0% on it for a decade. When the emergency arrives, he does not sell the gold – he pledges it to a gold-loan NBFC at 15%, and rents his own money back. Those same savings could have bought a shop, a tractor, a pump set, an acre, or a daughter’s schooling, every one of which would have compounded for years.

Households and temples hold roughly 25,000 tonnes, worth over $3.5 trillion, parked entirely outside the productive economy.

Creepy marketing for gold

Who does not remember the televised Ramayan and Mahabharat, with gods and demigods laden with gold jewelry and crowns, or the goddess Lakshmi poster with coins raining from her palm? In South India, the big temples are flanked by the big gold jewellery stores, and not by coincidence.

Here we note the irony: in Ramayan, the golden deer is a demon in disguise, and chasing it costs Lord Rama everything. In the Mahabharat, Parkishit, the grandson of the great archer Arjun, permitted Kaliyug (the dark age) to reside in gold, alongside gambling, alcohol, lust and violence. 

Gold, the hedge

Over the last fifteen years, the correlation between gold and the Nifty 50 on weekly returns is -0.003. Correlation with the BSE Sensex (weekly returns, 2011 to 2026) is -0.003, and gold’s correlation with the S&P 500 is +0.128. Hedge, what hedge? 

$1,500 of metal and $2,900 of fluff

Now let’s look at the cost of extracting gold, because it settles the debasement argument. Gold’s all-in sustaining cost (AISC)  is currently near $1,500/oz (average across global mines), while Gold is $4,400 (mid August 2026). That is a very large spread, possibly second only to memory chips, which at least have a use. This spread destroys the case for gold as a hedge against currency debasement. If you were being paid for debasement, price and extraction cost would debase together, because both are denominated in the same falling currency. If we do an honest risk attribution, it is $1500 per ounce of gold plus $2900 per ounce of nothing, earning nothing, and costing something to store and insure.

Who benefits from Gold, and who pays the bill

In FY 2025-26, India imported $72 billion of gold, a record. Gold alone is nearly 9% of India’s import bill, second only to crude. 

Now look at who sits on the other side of that trade. The government collects 15% customs duty plus a 3% IGST before the metal reaches a shop counter. The banks and gold-loan NBFCs earn 15% interest on the gold loan. Every institution in the gold value chain earns a spread on gold. The one party with no income line is the retiree holding the metal, who pays for the import duty, and the interest and the vanity.

QARI’s view

Get out of gold and stay out. Momentum is fun until it isn’t. Gold is not a hedge, and it has negative carry, and it pays you nothing for the wait.