How to Invest in Gold and Silver

Market Snapshot

Gold has reached ?1,38,600 per tola, and silver is at ?1,34,000 per kilogram. Meanwhile, China’s gold reserves chart shows a long flat trend until a crazy jump in mid-2024.

Why Precious Metals Matter

Historically, currencies were backed by gold. Even after the 1971 decoupling, gold remains a universal hedge when any currency—dollar, pound, ruble, yuan—feels unstable. When global turmoil hits, demand for gold soars.

Silver follows behind. In 2020, silver was around ?40,500 per kg; it jumped to ?65,400 in one year and now stands at ?1,34,000. Industrial demand—from solar panels, electric vehicles, smartphones, telecom, medical devices, water purification—makes silver price inelastic.

Key Fundamentals

• Currency Agnosticism: Gold can replace any currency.
  
  

• Scarcity: Gold can only be mined; new supply is limited.
  
  

• Industrial Use: Silver’s industrial share rose from 45% to around 60–65%.
  
  

Gold-to-Silver Ratio

Over the past century, you needed roughly 65–67 ounces of silver to buy one ounce of gold. In 2020, that spiked to 127:1. Today it’s close to 92:1, indicating either underpriced silver or overpriced gold and reflecting economic uncertainty.

Who’s Buying?

Central banks and retail investors alike. China’s annual gold purchases jumped from about 3,000 kg to 30–40,000 kg. India’s gold reserves grew from 650 tonnes in March 2020 to 880 tonnes in March 2025, making India the seventh-largest reserve holder.

Should You Invest?

Yes. Gold and silver are stable assets that have beaten Nifty 50 over 5, 10, 15, and 20-year periods, offering around 15% annual returns compared to Nifty’s 13.5%. Allocate 10–20% of your portfolio to these metals: younger investors at 10%, older at up to 20%.

How to Invest

Avoid Jewelry as Investment

Jewelry brings making charges, GST, purity concerns, and liquidity issues. Instead, consider:

1. Digital Gold and Silver

Buy and sell instantly via apps (Paytm, IDBI) or jewelers. Set up monthly SIPs to average out price swings.

2. Gold ETFs

Many options exist—SBI Gold ETF, HDFC Gold ETF (a fund-of-funds), Zerodha Gold ETF, Nippon India Gold ETF. Low expense ratios, instant liquidity during market hours, and historical five-year returns around 15%.

3. Silver ETFs

Launched in 2022. Nippon India and ICICI others offer them. Expect higher volatility than gold—average three-year returns around 30% per annum but with sharp ups and downs.

4. Gold Loans

Pledge jewelry as collateral at 10–12% interest, avoiding selling. Once loan is repaid, you reclaim your gold intact.

Volatility and Risk

Gold and silver aren’t fixed-return assets. They fluctuate like equities. The 2008 financial crisis saw gold prices crash when investors liquidated assets, only to triple by 2011. Silver’s volatility is often 1.5–2× that of gold.

Investment Strategy

• Use SIP in digital gold or ETFs.
  
  

• Don’t time the market; over 5–20 years, precious metals have delivered solid returns.
  
  

• Maintain 10–20% portfolio allocation based on age and risk appetite.
  
  

Precious metals blend industrial demand, financial stability, and geopolitical insurance—making them a valuable addition to any long-term portfolio.