Gold and silver have experienced a remarkable surge in value this year, reaching new record highs. Gold has delivered returns of more than 28% over the past 12 months, while silver has seen returns of over 33%. This has led investors to consider whether they should increase their holdings of gold or opt for silver due to its increasing demand. The price of these precious metals has skyrocketed to unprecedented levels, with gold reaching around Rs 80,000 per 10 grams and silver surpassing Rs 1,00,000 per kg in the national capital. Industry experts anticipate a 10-12% decrease in sales volume compared to last year's Dhanteras, but higher prices may still result in a 12-15% growth in value.
Gold vs Silver
A recent study conducted by Ventura Securities on Gold and Silver indicates that Gold is now serving as a hedge against US economic sanctions in addition to its traditional roles as a safe haven asset and protection against inflation. Despite inflation being kept in check, Gold has surged to reach new record highs. The rise in geopolitical tensions, specifically the ongoing Israel-Middle East conflict, has bolstered the appeal of gold as a safe-haven asset, leading to a surge in its price. Despite these obstacles, certain jewellers maintain a positive outlook for the upcoming festival season, pointing to an expected 4 million weddings planned post- Dhanteras.
Silver prices have reached their highest level since 2012 due to ongoing supply shortages and anticipated monetary easing by the Federal Reserve. The Silver Institute of America predicts a demand of 1.219 billion ounces for 2024, surpassing a supply of only 1.004 billion ounces, resulting in a projected deficit of 215 million ounces for the year.
This deficit is expected to increase by 2025, with Russia planning to boost its precious metals holdings including Silver. China's plan to establish a national solar grid by 2030 will also drive up the demand for Silver, as the country's entire production is currently consumed domestically. India's $109 billion investment in renewable energy sources, which require significant amounts of Silver, further contributes to the growing demand.
What should you pick?
"On festive occasions, traditionally, gold and silver have been the traditional investment choices of the investors. Both gold and silver are sentimentally driven asset classes. Silver has delivered around 8.8% with a deviation range of 8% in the 10-year timeframes, and gold is 10.8% for the same timeline with a deviation range of 6%, whereas equity has delivered 12.91% with a deviation range of 5.12%. With makes investing in equity a superior choice. In the past, gold has not consistently outperformed in all five-year timeframes, making it less reliable as a defensive asset compared to debt options. In fact, it’s only in the last five years that gold has been on par with equity returns," said Hrishikesh Palve, Director, Anand Rathi Wealth Limited.
"In our opinion, investors should opt for 80% in equity and 20% in debt and target a 12% in the long term, with at least 55% exposure to large caps and the rest to mid and small caps for equity. For personal purposes, one may add gold; however, before adding more gold to your portfolio, evaluate whether you’ve already exceeded the recommended 10% allocation," Palve added.
"For those seeking stability and wealth preservation, gold shines as the preferred choice. Yet, for those willing to embrace higher risk for the prospect of greater rewards, silver unveils a pathway to dynamic growth," said Akhil Rathi, Vice President, Financial Concierge at 1 Finance.
"Gold remains a reliable store of value, especially during economic uncertainties. While gold prices are near record highs, making it costly, investors still prefer it for long-term stability and diversification. Cultural significance: Gold holds traditional importance during Diwali, and any price correction could encourage festive purchases," said Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL)
He added: "Silver is more accessible for small investors and could attract those discouraged by gold’s high prices. Silver benefits from dual use as both an investment and an industrial metal, with demand expected to rise from green technologies like solar energy. Potential for higher returns: Silver tends to be more volatile, which can result in higher returns during favourable market conditions. If you are looking for stability and long-term wealth preservation, gold may be a better option despite the higher prices. On the other hand, silver could appeal to investors seeking affordability and exposure to industrial growth potential. A balanced approach involving both metals 50-50 5 could help diversify your portfolio this Diwali."