Gold vs Silver ETFs: What Should Investors Do?

Rising tensions in West Asia following the US-Israel strikes on Iran have pushed investors towards traditional safe-haven assets like gold and silver.

With markets turning volatile, many are now asking: Should you invest in gold ETFs or silver ETFs?

Gold Seen as Primary Safe Haven

According to market experts, gold remains the preferred option during periods of geopolitical uncertainty.

Siddharth Srivastava of Mirae Asset Investment Managers said that gold ETFs typically act as the primary safe-haven during global stress. Silver ETFs may also benefit in risk-off phases, but their performance is influenced by industrial demand, making them more volatile.

Similarly, Shivam Pathak, founder of Asset Elixir, said gold reacts quickly to uncertainty and is considered a more stable hedge. Silver, while capable of delivering strong returns, tends to swing more sharply due to its dual role as both a precious and industrial metal.

Recent Price Movement

Data from the Multi Commodity Exchange (MCX) shows gold prices surged nearly 4% recently, touching around ₹1.68 lakh per 10 grams. Although the metal had corrected last month, it now trades close to its earlier highs.

Silver futures also gained sharply, rising over 3% in recent sessions. However, silver has shown wider price fluctuations compared to gold.

How Much Should You Allocate?

Experts suggest investors may consider allocating 10% to 15% of their overall portfolio to precious metal ETFs.

Within that allocation, a higher weight towards gold ETFs is recommended for stability. Silver can be added in smaller proportions to potentially enhance returns.

However, experts caution that these instruments should not be treated as short-term trades. Instead, they are better suited as long-term portfolio hedges, ideally held over a five-year horizon.

Global Factors at Play

Precious metals are influenced by several global factors:

• A stronger US dollar typically pressures both gold and silver prices.

• Rising crude oil prices can increase inflation expectations, which usually supports gold.

• Interest rate movements also impact gold more directly.

• Silver’s performance additionally depends on global economic growth due to its industrial usage.

Around 20% of the world’s oil passes through the Strait of Hormuz. Any disruption in this region can affect inflation expectations and commodity prices globally.

Performance Snapshot

Over the past month, gold ETFs delivered slightly negative average returns, while silver ETFs saw sharper declines. However, over a one-year period, silver ETFs outperformed gold ETFs significantly.

This highlights silver’s higher return potential — but also its higher volatility.

Near-Term Outlook

In the short term, gold appears relatively attractive from a risk-reward perspective amid geopolitical uncertainty.

Silver could witness sharper swings depending on industrial demand and market sentiment.

As always, financial experts advise that investment decisions should align with individual risk tolerance and long-term goals.