Precious metals are glittering brighter than ever. Gold and silver exchange-traded funds (ETFs) have delivered stellar returns over the past year, with some funds recording gains of nearly 40%, driven by record-high prices amid global uncertainty, rising industrial demand, and safe-haven buying.
ETF Performance: Gold Shines, Silver Keeps Pace
According to market data, gold ETFs generated an average return of 40.44% in the past 12 months. Tata Gold ETF led the pack with a 40.76% return, followed closely by ICICI Prudential Gold ETF at 40.74%. Even the lowest performer, Invesco India Gold ETF, managed a solid 39.69% gain.
Silver ETFs also impressed, with an average return of 36.14%. Tata Silver ETF topped at 36.78%, followed by Aditya Birla Sun Life Silver ETF at 36.72%, while the SBI Silver ETF Fund of Fund still delivered 35.45%.
Funds offering combined exposure to both metals—like Edelweiss Gold and Silver ETF FoF and Motilal Oswal Gold and Silver ETF FoF—earned 38.07% and 38.72%, respectively.
What’s Driving the Rally?
Experts attribute the surge to multiple global and domestic factors:
- Geopolitical tensions and trade tariffs have increased safe-haven demand for gold.
- Industrial consumption, particularly in semiconductors, solar panels, and electric vehicles, has boosted silver demand to decade highs.
- Currency weakness and U.S. rate cut expectations have also made precious metals more attractive.
On Monday, gold and silver prices in India touched fresh highs of ₹1.05 lakh per 10 grams and ₹1.24 lakh per kg, respectively.
Expert Views: How Much Should Investors Allocate?
Financial planners recommend caution despite the glittering returns.
- Pallav Agarwal, Certified Financial Planner at Bhava Services LLP, suggests that 15–20% of a diversified portfolio should be allocated to gold and silver. He emphasized their role as hedges against uncertainty, not speculative assets.
- Shweta Rajani, Head of Mutual Funds at Anand Rathi Wealth, advises a balanced 80:20 equity-to-debt allocation, with gold exposure capped at 10–20%. She warned that silver, being more cyclical and industrial-demand driven, may not be ideal for long-term portfolios.
Both experts discourage lump-sum entries at current highs and instead recommend Systematic Investment Plans (SIPs)to average costs and reduce volatility.
Mutual Fund Strategy: ETFs vs Multi-Asset Funds
While ETFs offer liquidity, transparency, and direct exposure to metal prices, multi-asset allocation funds provide professional management and tax efficiency.
- Agarwal favors multi-asset funds, citing their ability to dynamically adjust allocations without investors triggering capital gains.
- Rajani, however, prefers ETFs, noting their simplicity and cost-effectiveness, while cautioning against investing via Fund of Funds (FoFs) due to layered expenses.
Long-Term Outlook: Defensive, Not Growth Assets
Despite the short-term surge, experts stressed that gold and silver should be viewed as defensive, wealth-preserving assets, not high-growth investments. Historical data shows that over 10 years, gold delivered over 12% CAGR only 11.8% of the time, while silver managed just 3.58%.
“Equity, particularly indices like the Nifty, remains the best long-term wealth creator,” Rajani noted, adding that gold and silver should together account for no more than 20% of a portfolio.
The Road Ahead
The next 6–12 months will hinge on geopolitical developments, U.S. Federal Reserve policy, and tariff actions. If global tensions persist, gold and silver could stay elevated; easing uncertainties may trigger a price correction.
For investors, the golden rule remains: align investments with long-term goals rather than chasing short-term rallies.
Read More: ICAI Urges Members to Pay Membership and COP Fees by September 30 to Avoid Disruption
