Gold, silver ETFs surge as Iran conflict widens. What should investors do?

Investors who want to protect their capital during war-like situations will move their money out of stocks and into safer assets

• Gold and silver ETFs surged as investors seek safe-haven assets
• Silver ETFs outperformed, some rising over 9 percent
• Analysts urge disciplined asset allocation amid market volatility

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Gold and silver exchange-traded funds (ETFs) opened sharply higher on March 2 as investors pivot to safe-haven assets following the US–Israel strikes on Iran, a move that has pushed West Asia into a wider conflict.

Analysts anticipate a volatile session, with heightened geopolitical risk driving fresh inflows into precious metals even as global equities may come under pressure.

At around 11 am, while equity benchmarks the Sensex and the Nifty were down around 1.4 percent, silver-linked ETFs by trading up to 9 percent higher.

Angel One Silver ETF surged around 9 percent, Tata Silver ETF, ICICI Prudential Silver ETF and Axis Silver ETF were up more than 6 percent. SBI and HDFC ETFs were trading between 5 and 6 percent higher.

On the gold side, most ETFs were trading 3-4 percent higher from the previous close.

The surge in ETFs can be tracked by gains in underlying bullion prices. MCX gold futures opened at Rs 1,66,816 per 10 grams, up 2.91 percent. Silver also edged higher, up 2.61 percent at Rs 2,90,188 per kg.

"Investors who invest their money show increased risk aversion to global events that cause geopolitical conflicts, which leads to their current behaviour of buying gold and silver ETFs," Piyush Jhunjhunwala, founder and CEO, Stockify, said.

Investors who want to protect their capital during war-like situations will move their money out of stocks and into safer assets, which results in increased investments into bullion-backed ETFs.

Why are investors choosing gold?

Gold serves as the major hedge against three types of risks, uncertain situations, currency market fluctuations and inflation concerns.

"The ongoing geopolitical tensions have once again reinforced the role of gold as a strategic hedge in investor portfolios," Jayant Manglik, Partner, Fortuna Asset Managers, said.

Historically, during periods of war or elevated global uncertainty, risk assets tend to witness volatility while safe-haven assets such as gold see increased inflows.

"We are already observing heightened interest in gold ETFs as investors seek liquidity, transparency, and ease of allocation without the challenges of physical storage," Manglik said.

Does silver follow gold?

Silver, while also a precious metal, tends to display a dual character. It benefits from safe-haven demand but is also influenced by expectations of industrial demand. In times of conflict, silver ETFs may see sharper price swings than gold due to their cyclical exposure.

"Silver also gains, but its industrial demand exposure can cause relatively sharper fluctuations. The market experiences short-term price increases, but their sustainability depends on how long and how intense the conflict lasts," Jhunjhunwala said.

What should investors do?

For investors, the current environment underscores the importance of disciplined asset allocation rather than tactical speculation.

"A calibrated exposure to gold and silver ETFs can help cushion portfolios against geopolitical shocks, currency volatility, and inflation risks, especially when uncertainty remains elevated," said Manglik.

"We suggest investors use gold and silver ETFs strategically for diversification and risk hedging rather than chasing momentum-driven rallies," Jhunjhunwala said.

Investors should avoid reacting emotionally to global headlines, Prashant Mishra, founder-CEO of Agnam Advisors said.

"Periods of uncertainty reinforce the importance of diversification across equities, debt, and gold, along with maintaining adequate liquidity and emergency buffers," Mishra said. Asset allocation discipline is far more important than attempting to time markets during geopolitical events, he added.