Indian households have long valued gold and silver as safe investments. With prices on the rise, these precious metals have become more attractive than ever. As of 2025, gold hit Rs. 1.2 lakh per 10 grams, marking a staggering 50.1% increase. Silver also saw a significant jump, climbing to Rs. 1.5 lakh per kg, a rise of 63.4% this year.
Understanding the Rise of Gold and Silver Prices
The current price surge in gold and silver often compels investors to consider these assets as a “Plan B.” The metals are shining amid uncertainty in the equity market. Their resilience is driven by various factors, ranging from geopolitical tensions to economic considerations.
Reasons Behind Gold’s Price Surge
- Weakening US dollar
- Anticipation of interest rate cuts
- Geopolitical uncertainties
- Increased central bank purchases
Central banks have purchased more gold in the last four years than in the previous two decades. In fact, gold now constitutes a significant portion of sovereign reserves, surpassing the US dollar for the first time since 1996. This phenomenon has led to gold being increasingly viewed as a reliable economic asset.
Silver’s Unique Role
Alongside its status as a safe haven, silver is also critical in various industrial applications. Its industrial demand, accounting for nearly 60% of total production, is driven by sectors such as:
- Solar energy
- Electronics
- Telecommunications (5G infrastructure)
- Semiconductors
- Electric vehicles
The supply of silver remains constrained, with a significant portion being produced as a byproduct of other mining activities, which adds to its price buoyancy.
Investor Interest in Precious Metals
Recent data indicate a growing interest in gold and silver ETFs, as these investments provide a practical alternative to physical assets. With the US recently naming silver a critical mineral, institutions are beginning to recognize its strategic significance. Russia has even started acquiring silver for its state reserves, a sign of its validity in sovereign portfolios.
Market Performance and Historical Context
Over the last decade, gold and silver have produced impressive annualized returns of 8.7% and 5.2%, respectively. Despite their rising value, it is crucial for investors to manage their expectations. The gold-to-silver ratio currently sits at approximately 87, well above the historical average of 60, indicating that silver may be positioned for a rally.
Analysts advise caution, acknowledging that while both metals have compelling narratives, they also possess inherent risks. Gold remains more resilient as a store of value compared to silver, whose fortunes are closely tied to economic conditions and industrial demand.
Navigating Investment Strategies
For investors contemplating allocations, diversification is essential. Experts recommend limiting exposure to gold and silver to about 10% of a portfolio. Investment vehicles such as ETFs and Funds of Funds (FoFs) are efficient for gaining exposure to these volatile assets.
Tax regulations favor gold and silver ETFs, with gains taxed at 12.5% after one year. For FoFs, the threshold extends to two years. For those looking for combined exposure, several fund houses offer gold-silver combo funds.
In summary, as gold and silver prices continue to rise, investors must stay informed and thoughtful about their strategies. The potential for profit exists, but so do significant risks.
