Flows favour equities, returns chase gold and silver. Where to invest?

International silver prices could climb toward $50 per ounce, translating into a 20-25 per cent rise in MCX silver prices to around ₹1,50,000 per kg

Over the past year, investors have witnessed a striking divergence in asset class performance. Gold has surged nearly 46.71 per cent, with silver closely following at 47.08 per cent, while the Nifty 50 has actually slipped 2.90 per cent. The message is clear: while equities have struggled, precious metals have quietly emerged as the wealth creators.

 

Yet, if we look at investor behavior, the story takes an interesting turn. Out of India’s ₹77 lakh crore mutual fund AUM, Gold Exchange Traded Funds (ETF) account for only around ₹66,660 crore and Silver ETFs just ₹22,160 crore—a combined exposure of barely 1.15 per cent of total MF AUM. In other words, despite delivering standout returns, precious metals remain severely under-owned in investor portfolios.

 

 

On the other hand, equity inflows are at record highs. As per AMFI data, equity scheme inflows hit an all-time high of ₹42,702 crore in July 2025. Systematic investment plan (SIP) flows too continue to scale new peaks, reflecting the unwavering faith of retail investors in equities even though the Nifty has delivered negative returns over the last year. 

 

 

Investors are chasing equities, but the real gains in the past 12 months have come from gold and silver. This is not a call to abandon equities but it is a timely reminder of asset allocation. A judicious slice of gold and silver can add both performance and protection when markets turn choppy.

 

Gold: From Safe Haven to Strategic Reserve

 

Gold has always been revered as a store of value, but its latest rally is more than just a response to inflation. Inflows into Indian gold ETFs tell the story. From April to July 2025, investors poured over ₹2,000 crore in June and another ₹1,256 crore in July into these funds—marking a sharp reversal from earlier outflows. 

 

As the global forces are at play, escalating the geopolitical tensions and growing distrust of the US dollar system have prompted central banks worldwide to accelerate gold purchases. In Q1-2025 alone, central bank buying was 24 per cent above the five-year average, with China and Poland leading the charge. This buying spree pushed international gold prices to a record $3,500 per ounce in April 2025, while in India, a weaker rupee lifted domestic prices beyond ₹1 lakh per 10 grams.

 

The freezing of over $300 billion in Russian assets after the Ukraine conflict further accelerated the de-dollarization trend. For many central banks, gold has become the ultimate insurance policy—liquid, portable, and free from political interference. With annual central bank purchases now exceeding 1,000 tonnes, more than double the decade average, gold’s importance has shifted from ornamental to existential. 

 

 

In the near term, the upside remains significant. International prices could climb to $4,750 per ounce, around 35 per cent gain from current level of $3,500 per ounce, which implies domestic prices rising toward ₹1,40,000 per 10 grams.

 

Silver: The Industrial Powerhouse

 

Silver’s rally is rooted in a different narrative. Beyond its monetary role, it is fast becoming indispensable to the global energy transition. In August 2025, the US government formally added silver to its Critical Minerals List, citing its role in solar panels, EV batteries, 5G networks, and medical devices.

 

This recognition coincides with soaring prices. Indian silver futures hit ₹1,25,000 per kg on September 2, mirroring global momentum. Institutional demand is also rising—Saudi Arabia’s central bank recently invested in silver ETFs, joining Russia’s earlier stockpiling. 

 

The supply side, however, is under pressure. For four consecutive years, global demand has exceeded supply, with a 148.9-million-ounce deficit in 2024 and a projected 117.6 million ounces in 2025. New mine development is limited since silver is mostly a by-product of base metals, making supply growth sluggish. In India, production is expected to fall from 2026 due to underinvestment, forcing greater reliance on imports.

 

This structural deficit, combined with rising industrial and investment demand, provides strong price tailwinds. International silver could climb toward $50 per ounce, translating into a 20–25 per cent rise in MCX silver prices to around ₹1,50,000 per kg.

 

The Bigger Picture

 

Gold and silver are no longer just a 'crisis hedge.' They are emerging as core portfolio assets—gold for its monetary independence, silver for its industrial indispensability. Yet Indian investors remain significantly underexposed to this asset class. At a time when equity valuations look stretched and global uncertainty looms large, precious metals offer both performance and protection.

 

The lesson is simple but urgent: asset allocation matters. A strategic slice of gold and silver may well define who preserves and who compounds wealth in the decade ahead.

 

(Jahol Prajapati is a research analyst at SAMCO Securities. Views are his own.)