In the ongoing debate between precious metals, Mirae Asset Mutual Fund's latest market update indicates that gold currently offers a superior risk-reward profile compared to silver. This assessment comes as both metals continue to attract significant investor interest, albeit driven by distinct market forces.
Gold's Enduring Appeal: Central Banks and Safe-Haven Status
Gold's optimistic outlook is underpinned by several structural drivers expected to support prices over the medium term. A primary factor is the aggressive buying by central banks globally. In the second quarter of 2026, central banks acquired 289 tonnes of gold, marking a substantial 62% increase year-over-year. Nations like Poland, China, and the Czech Republic were prominent buyers, with the Reserve Bank of India also expanding its gold reserves.
This trend is further corroborated by the World Gold Council's survey, which reveals that 89% of reserve managers anticipate an increase in global gold reserves, with 45% planning to augment their own holdings within the next year. Despite some global profit-booking and outflows from gold-backed ETFs in certain markets, Indian investors have consistently increased their gold allocations, viewing it as a crucial portfolio diversifier and a hedge against uncertainty.
Silver's Volatility: Supply Constraints and Industrial Demand
While silver also possesses supportive fundamentals, its market dynamics differ significantly from gold. Approximately 70-75% of global silver production is a byproduct of mining other metals like copper, zinc, and lead, making it challenging for miners to rapidly scale up production in response to price surges.
The Silver Institute projects that the global silver market will experience its sixth consecutive year of supply deficit in 2026, with an anticipated shortfall of 46.3 million ounces. India, too, is grappling with tighter supply, evidenced by domestic silver premiums rising to $3-$4 per ounce, a notable increase from the previous 25-50 cents before recent import restrictions. This reflects robust demand coupled with limited availability.
Recent Price Trends and Key Risks
Both gold and silver have demonstrated volatility in recent weeks, followed by sharp rallies. Gold prices surged from approximately ₹12,380 per gram on July 28 to ₹13,287.28 per gram by August 7. Silver mirrored this upward trajectory, rising from around ₹1.24 crore per kilogram to ₹1.33 crore per kilogram over the same period. Analysts attribute gold's stronger investment demand and safe-haven appeal as key reasons for its more favorable risk-reward profile currently.
Despite these supportive fundamentals, both precious metals face macroeconomic headwinds. A stronger US dollar, rising real bond yields, and a hawkish stance from the US Federal Reserve could diminish the appeal of non-interest-bearing assets, potentially weighing on prices. The US Federal Reserve maintained interest rates at 3.50%-3.75% in July but signaled potential for further tightening, suggesting continued volatility for precious metals over the coming 6 to 12 months.
Given this backdrop, Mirae Asset advises a staggered investment approach for long-term investors, enabling them to navigate short-term price fluctuations while gradually building exposure to precious metals.