A 70:30 strategy could help investors balance gold and silver exposure: Tata Mutual Fund

Gold and silver can both have a role in an investor’s portfolio, but they serve different purposes. Tata Mutual Fund in a note on precious metals said that outlook remains bullish on both precious metals over the medium to long term, while favouring a higher allocation to gold due to its defensive nature and relatively lower volatility.

In this note, the fund house said that a 70:30 allocation between gold and silver may be considered as a broad strategic framework for investors looking to diversify their precious metals exposure as this approach gives a higher weight to gold because of its relatively stable and defensive characteristics, while using silver to capture the metal’s longer-term growth potential.

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“For investors seeking diversified exposure to precious metals, we prefer a strategic allocation with a higher weight to gold, given its stability and defensive characteristics, complemented by silver’s long-term growth potential. A 70:30 allocation between gold and silver may be considered as a broad strategic framework,” said Tata Mutual Fund.

In recent weeks, gold prices witnessed a recovery supported by softer US economic data and easing bond yields. In the near term, expectations around US interest rates, movements in the dollar and bond yields could continue to influence prices.

The broader investment case for gold is supported by structural factors such as continued central bank purchases, sustained investment demand and the need for portfolio diversification. Gold also continues to serve as a hedge against macroeconomic uncertainty and currency debasement risks. Investors could therefore consider periods of weakness to gradually build long-term exposure rather than trying to time the market.
Central bank buying has become an especially important support for the yellow metal. According to the World Gold Council data cited in the report, official-sector gold purchases rose to 289 tonnes in the second quarter, the strongest second-quarter buying on record. Total purchases in the first half of 2026 stood at 345 tonnes.SilverSilver has a different investment profile. Unlike gold, which is primarily viewed as a defensive asset, silver has a significant industrial demand component. Its long-term prospects are linked to applications in electronics, AI-related hardware, renewable energy infrastructure and solar technology.

The report notes that silver’s industrial demand exposure could result in greater volatility when global growth slows or interest-rate risks rise. Moderation in solar installations and easing supply tightness have also reduced some near-term demand catalysts. As a result, investors may consider a staggered approach to silver with a medium-to-long-term investment horizon.

Despite these near-term concerns, the longer-term supply-demand picture remains supportive. The report expects 2026 to mark the sixth consecutive year of a silver deficit, with demand continuing to exceed available supply. Industrial applications account for the majority of silver consumption, and industrial demand has steadily increased between 2021 and 2024.

What happened in July?Geopolitical uncertainty remains an important factor for precious metals. The report highlights renewed US-Iran tensions and disruptions to Red Sea shipping routes as key market developments during July. These events pushed oil prices higher and raised concerns about inflation.

At the same time, a strong US dollar remained a headwind for both gold and silver, as investors were attracted towards higher-yielding assets. The gold market was also influenced by a Federal Reserve that remained focused on inflation, while continued central bank purchases and strong physical demand from China provided underlying support.

Gold’s defensive appeal could remain relevant as geopolitical risks persist. The report notes that rising geopolitical tensions reinforce gold’s safe-haven characteristics. It also highlights growing US debt levels and the possibility that policymakers may have limited room to keep interest rates elevated for an extended period, which could support gold over time.

Silver’s supply constraints remain a long-term supportSilver’s investment case is also supported by developments on the supply side. China has a significant role in the global silver supply chain, accounting for about 11% of global reserves and controlling an estimated 60% to 70% of refining capacity, according to the report.

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The report suggests that efforts by China to tighten control over silver supply chains and prioritise domestic availability could create constraints in global markets. Combined with a persistent supply deficit and rising industrial demand, these factors support a constructive long-term outlook for silver, despite the possibility of sharp price fluctuations in the near term.

Gold currently has the edge over silverRecent market performance also highlights the different characteristics of the two metals. Domestic gold prices outperformed international gold during the year, supported by rupee depreciation and higher import duties. Indian gold prices were up about 6% year-to-date even as international gold prices declined.

Silver, meanwhile, underperformed gold as its industrial-demand exposure made it more vulnerable to war-driven cost pressures and interest-rate risks. The gold-silver ratio also increased from around 51 in May to 70, reflecting a stronger market preference for gold.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)