Gold and Silver: The perfect investment mix for uncertain times

Gold and silver are both precious metals, but they behave very differently because they are influenced by distinct economic forces.

As financial markets continue to swing between optimism and uncertainty, Indian retail investors are steadily increasing their allocation to precious metals — not just for safety, but also for growth. The shift is visible across investment flows: in 2025 alone, Gold ETF assets have surged from Rs 45,000 crore to Rs 1.02 lakh crore, while Silver ETF assets have risen from Rs 12,000 crore to Rs 42,000 crore. Net inflows since January stand at approximately Rs 27,000 crore for gold and Rs 17,000 crore for silver, reflecting a broad-based rise in participation.

Much of this momentum has come from investors moving away from physical gold towards more transparent, regulated structures such as ETFs and Fund-of-Funds (FoFs). During periods of equity and bond market volatility, these products have become preferred tools for low-cost, easily accessible exposure to precious metals.

Easier access boosts participation

Asset management companies have played a significant role in this trend. Nearly 16 new ETFs and FoFs have been launched this year, many with low minimum investment requirements, SIP options and mutual-fund-style convenience. Improved price tracking and competitive expense ratios have made these solutions more cost-efficient than physical metal.

Digital distribution has accelerated the shift even further. Broker platforms, online marketplaces and NFO channels now offer near-instant onboarding, while newer products — such as passive Gold–Silver FoFs — give investors diversified exposure with one click.

Also read | Club ITC's Days of Joy: Up to 50% off on stays, should you apply for ITC Hotels loyalty program?

Why gold and silver behave differently

Gold and silver are both precious metals, but they behave very differently because they are influenced by distinct economic forces. Gold functions almost entirely as a monetary asset, with its price shaped by interest rates, inflation expectations and currency movements. Its stability is further reinforced by strong central-bank buying — more than 1,000 tonnes annually for three consecutive years — making gold a dependable store of value and a reliable hedge during market stress.

Silver, on the other hand, is only partly a monetary metal. Over half of its demand comes from industrial uses such as solar panels, electronics and electric-vehicle components. This ties silver closely to economic cycles: it tends to outperform when industrial activity rises but corrects sharply during slowdowns. As a result, silver is significantly more volatile than gold.

These contrasts also show up in market behaviour. Gold’s low correlation with equities makes it an effective diversifier, while silver’s industrial linkages make it more aligned with risk assets. Global benchmarks reflect this difference, allocating far higher weight to gold because of its liquidity and long-standing financial role.

Also read | Why are global ETFs trading at a premium? What should investors do?

What data says: A gold-heavy mix performs better

Long-term back-tested data shows that portfolios with a higher allocation to gold — typically 60–80% of the precious-metals basket — deliver better risk-adjusted returns, even though silver-heavy combinations may occasionally produce marginally higher short-term returns.

Across 1-, 3-, 5-, 10- and 15-year periods, a 70:30 gold–silver mix has historically generated:

• Comparable (sometimes better) CAGR than silver-heavy portfolios
• Significantly lower volatility
• Superior risk-adjusted outcomes

Ideal mix for Indian investors

Gold continues to serve as the anchor of a precious-metals allocation, offering stability, liquidity and protection during market stress. Silver, with its strong industrial demand — particularly from renewable energy and electronics — adds cyclical and long-term structural growth opportunities.

A balanced allocation, tilted more heavily towards gold, ensures that investors capture silver’s upside without sacrificing the defensive qualities that make gold a timeless store of value.

Most institutions and global benchmarks reflect this thinking, and historical data supports a gold-heavy ratio for investors seeking both safety and growth.

Conclusion

Precious metals are once again becoming a meaningful part of Indian households’ financial strategy. As technology and product innovation transform how investors access gold and silver, portfolios can now be constructed more efficiently, transparently and affordably than ever before.

For most investors, a 60–80% allocation to gold and 20–40% to silver within the precious-metals segment strikes the right balance between resilience and opportunity. In a world marked by uncertainty, this combination offers both stability and participation in long-term industrial growth trends.

The writer is Head of Research, Passive Business, Motilal Oswal Asset Management Company.

Disclaimer - Analysis based on back-tested data of Gold & Silver Prices converted to INR, for the period 2000–2025. This article has been issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. The information / data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, estimates and data included in this article are as on date. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance of any financial product, scheme, or asset is not indicative of future results. Readers shall be fully responsible/liable for any decision taken on the basis of this article.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.