FOMO Alert: Wealth managers warn against chasing gold, silver rally

Bullion surged as much as 3.1% on Monday to a peak of $4,381.52 an ounce.

Investors’ perennial tendency to chase performance is once again in focus, as gold and silver have delivered eye-catching returns over the past year. In a discussion with N Mahalakshmi for The Wealth Formula's Diwali Blockbuster roundtable, top private bankers underlined that while precious metals remain a key hedge in client portfolios, the recent sharp rallies warrant caution.

Feroz Azeez, Deputy CEO of Anand Rathi Wealth, explained the behavioral dynamics driving investor decisions. “Recency bias is going to be taking over most of the decision making; most people will be selling an asset when they are supposed to buy it,” he said, highlighting how performance-chasing often leads investors to enter markets at peaks and exit prematurely.

Azeez highlights that the rally in gold and silver, particularly in dollar terms, has been remarkable. He believes that we have seen one of the largest technical rallies. Basically, all the possible resistances are broken. "So, I personally think that it’s not the best time to buy,” he cautioned that while the temptation to participate is strong, inflows driven by fear of missing out (FOMO) may not sustain, and a breather is likely in the near term.

“Over a five-year rolling period, median equity returns are still likely to outperform commodities like gold, provided investors choose the right fund managers,” Azeez added, stressing the value of active management in generating excess returns.

Investors, especially high-net-worth individuals, are recalibrating allocations, balancing the allure of precious metals with equities and other asset classes.

While the metals rally has attracted significant attention, Azeez said measured, disciplined investing remains key. “Net-net past performance will be chased, but this time not for too long. Once the rally stops and there is some sideways or down movement, the flows will become a little more reasonable,” he explained.

As the year-end approaches, wealth managers are encouraging clients to view gold and silver as part of a broader diversification strategy rather than a short-term play.

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