Gold vs silver: Why Tata MF prefers a 70:30 allocation despite silver’s long-term potential

Tata Mutual Fund has retained a bullish long-term view on both gold and silver but prefers a higher allocation to gold, citing its defensive characteristics and relatively lower volatility. In its August 2026 outlook, the fund house said investors seeking diversified exposure to precious metals could consider a broad 70:30 allocation between gold and silver, balancing gold’s stability with silver’s structural growth potential.

Gold gets the larger share

The preference for gold reflects its role as a hedge against macroeconomic uncertainty and currency debasement risks. Tata MF said gold prices have recovered in recent weeks, supported by softer US economic data and easing bond yields. However, interest-rate expectations, movements in the dollar and bond yields could continue to drive volatility in the near term and keep prices range-bound.

Despite these short-term risks, the fund house remains constructive on gold over the medium to long term. Continued central-bank purchases, sustained investment demand and the need for portfolio diversification are seen as key structural supports.

Central-bank demand remains particularly important. According to the outlook, official-sector gold purchases rose to 289 tonnes in the second quarter, the strongest second-quarter buying on record, taking purchases during the first half of the year to 345 tonnes.

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Silver offers growth

Silver, meanwhile, has a different demand profile because it functions both as a precious metal and an industrial commodity. Tata MF said silver could benefit from rising adoption across electronics, AI-related hardware, renewable energy infrastructure and solar applications, supporting its long-term growth prospects.

However, the fund house expects greater near-term volatility in silver. Moderation in solar installations and easing supply tightness have reduced some immediate demand catalysts, while the metal remains more exposed to the health of the global economy and industrial demand trends.

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The difference in risk profiles has also been reflected in market performance. Tata MF noted that the gold-silver ratio rose from approximately 51 in May to 70, indicating a stronger preference for gold. Investors have viewed gold as a defensive asset, while silver’s industrial exposure has made it more sensitive to growth and interest-rate concerns.

Silver’s long-term case

Despite its lower allocation, Tata MF does not have a bearish long-term view on silver. The outlook said 2026 is on track to become the sixth consecutive year of silver deficits, with demand continuing to outpace available supply. Industrial applications account for the majority of silver consumption.

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China’s role in the silver supply chain is another structural factor. The outlook said China holds about 11% of global silver reserves and controls 60-70% of refining capacity, while efforts to prioritise domestic availability could create constraints in global markets.

Given silver’s higher volatility, Tata MF recommends a staggered investment approach over a medium-to-long-term horizon. The overall strategy, therefore, places gold at the core of precious-metal exposure while using silver to capture longer-term industrial and structural growth themes.

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