Gold and silver funds lead with up to 212% gains in last one year. What investors should know, and whether they can invest globally

Silver funds outperformed but remained more volatile

• Silver funds surged 212.71 percent, outperforming all asset classes last year
• Experts advise limiting precious metals exposure to 5–10 percent of portfolios
• Investors should avoid chasing rallies; consider systematic investment methods.

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Gold and Silver funds, whether Exchange-Traded funds (ETFs) or Fund of Funds (FoFs), have delivered strong returns over the past year, driven mainly by precious metals. Gold prices have increased significantly, but silver has been the top performer, rallying nearly 3 times over the last year to peak levels.

Moreover, several gold-focused schemes have posted gains of more than 80 per cent, while silver ETFs have surpassed the 200 per cent mark in the past year. The numbers show that precious metal commodities have moved from a niche choice to a major source of returns for many portfolios over the last year.

In fact, returns from precious metals have far outpaced those from equity-based funds, highlighting a sharp divergence in asset performance. Equity Large Cap funds delivered a modest return of 9.12 per cent, while Equity MidCap funds lagged further behind at 6.63 per cent. Moreover, Equity Small Cap funds delivered a negative return of 2.83 per cent. In contrast, gold posted a striking return of 86.83 per cent. Silver performed even more strongly, surging 212.71 per cent over the same period, making it the clear outperformer among all asset classes. The data shows that while equities delivered single-digit gains, investors who allocated to precious metals benefited from exceptional returns.

So why are these funds performing better? "Gold and silver funds have performed strongly in recent months, supported by safe-haven demand, geopolitical uncertainty, and expectations of easier global monetary policy. Gold funds delivered steady gains with lower volatility, while silver funds outperformed but remained more volatile, driven by strong industrial demand and speculative interest,” said Satish Dondapati, Fund Manager, Kotak Mutual Fund.

Besides, the sharp rise in silver prices has been the main factor driving the recent outperformance of commodity-focused mutual funds and ETFs in India. Consequently, many of these commodity funds have achieved returns well above those of broader equity and hybrid categories during this time.

“In India, however, true diversified commodity exposure remains limited. Most domestic commodity funds fall into two broad buckets. The first includes precious metal funds and ETFs that provide direct exposure to gold and silver prices. The second consists of so-called quasi-commodity funds, which invest in equity shares of commodity-linked companies such as metals, mining, and energy players. These portfolios typically include stocks of companies like Vedanta, Tata Steel, or other metal producers, which tend to benefit when commodity prices rise,” said Sachin Jain, Managing Partner, Scripbox.

“Their performance, therefore, is closely linked not just to commodity prices but also to corporate earnings, balance sheets, and equity market sentiment,” adds Jain. But here, particularly, precious metal funds have performed far better than quasi-commodity funds.

What investors must do

From a portfolio construction perspective, Jain says, “We suggest investors strictly follow an asset allocation-led approach. For aggressive and very aggressive investors, commodities—largely precious metals—can play a diversification role, typically capped at around 5–10% of the overall portfolio. This allocation is intended to act as a hedge against inflation, currency volatility, and geopolitical risk, rather than as a return-maximising asset class.

Echoing similar views, Paramdeep Singh, financial services veteran and founder of Long Tail Venture, said that returns depend on both commodity prices and currency movement, so volatility is higher. Costs, liquidity, and tracking error deserve close attention. "I view commodities as a diversification tool rather than a core holding. Exposure should be limited to 5–10% of a portfolio and aligned with long-term cycles," Singh added.

While experts suggest having up to 10% exposure to such funds, Dondapati explained how one should allocate their investment to them. He said, "In the current environment, with prices at record highs, investors should exercise caution and consider a systematic investment approach instead of lump-sum investments. Existing investors should stay aligned with their asset allocation strategy and maintain limited exposure to precious metals, based on their risk profile and investment horizon.”

Therefore, at current levels, after a sharp rally in precious metals, experts believe that investors should not chase incremental exposure. Investors who are already invested and are within their recommended allocation can remain invested, while those whose commodity exposure has risen materially above target levels may consider partial profit-booking. “For investors who have missed the rally, it may be better to wait rather than enter at elevated valuations,” said Jain.

Overall, while precious metal commodities have delivered strong short-term performance, especially over the last year, investors should view them as a tactical, allocation-driven exposure rather than a core growth asset, and remain mindful of valuation, volatility, and tax considerations.

Can you take exposure in a global commodity fund?

On international commodity exposure, Indian retail investors have limited direct options. According to experts, there is currently no straightforward domestic route to invest directly in global commodity ETFs. The primary method is via the Liberalised Remittance Scheme (LRS), under which individuals can remit funds overseas, up to the prescribed annual limits, and invest in global exchanges offering a wide range of commodity ETFs and futures-linked products.

Alternatively, Indian investors can access international commodities through fund-of-funds structures. These funds typically invest in global natural resource or commodity-related equity funds, such as mining or metal-producing companies, rather than directly tracking commodity prices. For instance, include global natural resource or gold mining strategies.

“Additionally, some India-listed ETFs and funds provide indirect exposure by tracking global commodity indices or investing in international mining and metals companies. Investors should consider factors such as currency risk, taxation, costs, and volatility before investing," said Dondapati.

Investors should also note that global fund-of-funds are not treated as equity funds for taxation purposes. They are taxed under debt fund taxation rules, which can significantly impact post-tax returns, especially for investors in higher tax brackets.