Gold vs silver investment strategy: What works in volatile markets amid geopolitical risks

Persistent deficits and expanding central-bank balance sheets continue to erode trust in fiat currencies, according to Anand Rathi Share & Stock Brokers. The brokerage points to increased official sector gold purchases since 2010, with acceleration following 2018 and 2022, as evidence that central banks are shifting reserve preferences towards non-sovereign, politically neutral assets.

Anand Rathi notes that “Sanctions and reserve weaponisation raise the value of non-sovereign money,” positioning gold as a key asset outside the control of any single sovereign or payment system. The firm observes that gold’s low volatility and negative correlation with equities during market downturns help it serve as a strategic hedge for capital preservation and crisis protection.

Negative real rates, which penalise cash and bonds, further favour real assets like gold. Anand Rathi states that “gold carries no policy risk”, making it especially attractive when traditional financial instruments are pressured by financial repression. The brokerage also emphasises that gold’s evolving role now extends from inflation hedge to a form of geopolitical insurance, reflecting rising regime risk sensitivity.

Silver, in contrast, is described as a hybrid asset combining monetary and industrial characteristics. Anand Rathi highlights that investment in silver is oriented towards tactical exposure and inflation sensitivity, with demand expected to rise due to the energy transition towards cleaner fuels, including applications in solar PV cells and electric vehicles. Silver’s supply is often constrained, as it is largely a by-product of base metal mining, making its market dynamics distinct from gold.

The brokerage explains that, in portfolio construction, gold is best deployed as a strategic hedge, while silver functions as a satellite bet that introduces higher volatility and a stronger linkage to equities. “Gold protects in risk-off periods, showing low volatility and near-zero or negative beta and correlation when equities correct,” Anand Rathi affirms. Silver, meanwhile, tends to outperform during risk-on phases, though its volatility limits its effectiveness as a defensive hedge.

Anand Rathi underscores that structure matters more than timing when investing in precious metals. Physical forms offer tangibility and no counterparty risk but present liquidity and storage challenges. Financial exposures, such as ETFs and sovereign bonds, are liquid and scalable yet introduce counterparty considerations. The brokerage reminds investors that “liquidity varies sharply across instruments” and that storage, insurance, and custody costs can erode returns.

In terms of wealth storage preferences, Anand Rathi observes a cultural shift among younger investors, who now favour portability, liquidity, and transparency. This trend is driving wealth storage towards state-neutral and fungible assets, with emotional ownership of gold and silver persisting but adapting to new portfolio logics and away from traditional balance-sheet considerations.

Finally, Anand Rathi reiterates that while equities remain the dominant wealth creation vehicle offering consistent double-digit returns over long periods, precious metals retain relevance. Gold adds stability rather than growth, whereas silver plays a cyclical, tactical role. Disciplined allocation, according to the brokerage, brings resilience to portfolios, even as tactical trades in metals can add noise to outcomes.

Based on the fundamentals and technical setup, Gold and Silver long-term bullish trend seems intact and still has the potential to deliver extraordinary returns in year 2026. However, If the government reduces import duties on gold and silver in the upcoming budget, domestic prices could come under pressure and could act as a short-term headwind for domestic prices, said HDFC Securities.

"We recommend investors to allocate up to 10% of their portfolio to precious metals - gold and silver, with the option to increase exposure based on individual risk appetite gradually. Our bullish view on precious metals can be captured by taking exposure in these asset class by accumulating available ETF on Exchange," it added.