In recent times, Indian households, typically known for their penchant for gold and silver as a form of savings, have found both precious metals rising dramatically in value. Gold has reached an astonishing Rs. 1.2 lakh per 10 grams, marking a 50.1% increase in value since the beginning of 2025. Simultaneously, silver has surged to Rs. 1.5 lakh per kilogram, reflecting a remarkable 63.4% rise. This growth is particularly significant considering the challenges facing the equity market, making these shiny assets increasingly attractive.
Both gold and silver have shown exceptional resilience amidst global instability, each fueled by different factors. Gold’s ascent is largely attributed to a weaker US dollar along with expectations of potential interest rate cuts, ongoing tariff wars, and heightened geopolitical tensions. These elements have reinforced gold’s status as a safe-haven asset. Moreover, central banks have been diversifying their reserves, purchasing more gold in the last four years than in the previous 21 years combined. Notably, the share of gold within sovereign reserves has surpassed that of the US dollar for the first time since 1996. This trend has led to what industry experts call the “Gold Put,” a phenomenon driven by less price-sensitive accumulation of gold as a secure alternative to US Treasuries.
Investor interest in gold has surged, with inflows into gold exchange-traded funds (ETFs) aligning with rising prices. Juzer Gabajiwala, a director at Ventura Securities, observes that gold is more than just an emotional investment; it serves as economic armor, transcending its traditional role of being hoarded in lockers and adorned as jewelry.
Silver, on the other hand, has taken on a dual role as both a safe-haven asset and a vital industrial resource. The demand for silver is being fueled by its application in fast-growing sectors including solar energy, telecommunications, and electric vehicles. Approximately 60% of silver production is utilized in industrial applications. Chirag Mehta, Chief Investment Officer at Quantum AMC, highlights that silver’s unique properties have amplified its desirability across various industries. Current projections for 2025 suggest that silver will maintain a supply deficit for the fifth consecutive year owing to tight supply conditions.
Recent actions from nations such as Russia, which has included silver in its state reserves, and reports of the Saudi Central Bank investing in silver ETFs, reflect growing institutional confidence in the metal. Additionally, the US government’s recognition of silver as a critical mineral underscores its strategic importance. A weak US dollar has further buoyed silver prices, making it more affordable for international buyers.
As both metals trade at premiums to historical averages, the current narratives surrounding gold and silver suggest compelling investment opportunities amid persistent global uncertainties. According to Axis Mutual Fund, gold remains a favored choice for safety due to its central bank purchases and ETF flows, whereas silver provides exposure to both safety and industrial growth.
However, soaring valuations require a cautious approach. Since March 2006, gold and silver have averaged annualized returns of 8.7% and 5.2% respectively. With current 10-year returns hovering near record highs, investors are advised to moderate their expectations. Although the fundamental drivers for both metals remain robust, experts caution against overoptimism. Anil Ghelani of DSP Mutual Fund notes that while the uncertainty premium for safe-haven assets persists, its volatility could impact future returns.
Notably, the gold-to-silver ratio is currently around 87, significantly above the long-term average of 60, indicating potential for silver to rally if its valuation gap narrows. While Mehta expresses skepticism around silver’s burgeoning industrial demand, he underlines the necessity for a thorough investigation into the sustainability of this demand against potential efficiencies or substitutes.
For those considering portfolio diversification, experts recommend a measured approach regarding gold and silver. Despite the perception that silver offers strong risk differentiation, its industrial ties mean its performance can be closely aligned with economic activity, making it less of a true diversifier compared to gold. In light of past volatility, particularly during financial downturns, experts suggest limiting allocations to these commodities within investment portfolios to around 10%.
Investors wanting to tap into these metals might find more advantageous routes through ETFs or Fund of Funds (FoFs), which can provide access without physical ownership. Some fund houses, such as Edelweiss, Mirae Asset, and Motilal Oswal, even offer combined gold and silver options. Furthermore, investment in ETFs and FoFs is now more favorable due to tax considerations, with long-term gains being taxed at competitive rates.
