Gold and silver prices on Multi Commodity Exchange (MCX) have posted extraordinary gains over the past year, delivering returns of over 50% and dramatically outperforming equities. MCX gold rates have surged over 52% while MCX silver price has rallied over 50%.
In stark contrast, the Indian stock market has remained nearly flat, with the benchmark the Sensex up just 0.07% and the Nifty 50 edging higher by 0.39% over the same period.
Why Precious Metals Have Outperformed
The rally in gold and silver has been underpinned by a combination of global and domestic factors. According to Jigar Trivedi, Senior Research Analyst, Reliance Securities, several themes are driving this outperformance:
Monetary Policy and Interest Rate Cuts: The expectations of interest rate cut by the US Federal Reserve have boosted gold prices. The yellow metal becomes more attractive when the opportunity cost of holding it declines. Softer inflation data in the US has further raised hopes of Federal Reserve rate cuts, supporting prices.
Inflation and Safe-Haven Demand: Persistent inflationary pressures and geopolitical tensions have strengthened demand for precious metals as a hedge against uncertainty. Central banks worldwide continue to accumulate gold as part of their reserve diversification strategy.
Industrial Demand for Silver: Silver is benefiting from its dual role as both a precious and industrial metal. Demand from solar panels, electronics, electric vehicles, and green energy projects is surging.
Supply Constraints: Silver supply growth remains limited as it is primarily produced as a byproduct of other metals. Gold supply is steady, but central bank buying and investment flows are absorbing much of it.
Currency Dynamics in India: The weaker rupee has further amplified the rise in local gold and silver prices.
Given these drivers, Trivedi remains bullish in the near term, projecting MCX gold price target of ₹112,000 per 10 grams and MCX silver price target of ₹130,000 per kg. However, he cautions that the sharp run-up may trigger bouts of technical correction.
Portfolio Strategy: Balancing Metals and Equities
Sandip Raichura, CEO – Retail Broking & Distribution and Director at PL Capital, noted that gold has had a “blockbuster year,” with domestic prices up more than 40% in 2025.
“The surge has been driven by heavy central bank buying, strong inflows into exchange-traded funds (ETFs), expectations of multiple US Fed rate cuts, and persistent geopolitical tensions linked to tariffs. These factors have made gold the safe-haven of choice, though fresh allocations at record levels now carry the risk of volatility,” he said.
On the other hand, Raichura pointed out that Indian equities have shown resilience, with the Nifty 50 up more than 5% in 2025 so far.
“The rally is supported by domestic reforms, policy stability, and steady earnings growth. The prospect of an India-US trade deal has further boosted sentiment, with markets betting on stronger exports and reduced tariff uncertainty. For investors with longer horizons, the return of risk appetite has firmly shifted attention back to equities,” he added.
“Every investor should keep some allocation to gold, but the wealth creation story is clearly with equities. India’s structural growth and demographics make stocks the engine of long-term returns,” Raichura emphasised.
Harshad Borawake, Head of Research & Fund Manager at Mirae Asset Investment Managers (India), echoed the need for balance. While he acknowledged precious metals as strong hedges amid macro uncertainties, he cautioned investors to tone down return expectations and instead focus on their diversification role. He prefers large-cap equities for their relative stability, while advising selectivity in mid- and small-caps given elevated valuations.
Portfolio Strategy: Balance Is Key
So, how should investors navigate this environment? Experts suggest a balanced portfolio approach:
Large-Cap Equities: Maintain core exposure for long-term growth and earnings stability.
Mid- and Small-Caps: Be highly selective, as valuations are elevated and volatility may rise.
Gold and Silver: Allocate 5%–10% of the portfolio to precious metals, not purely for chasing returns but as a hedge against macro uncertainties, currency risks, and market downturns.
Gold and silver have dazzled with stellar returns, leaving equities in the dust over the past year. But equities are regaining momentum, with improving macro conditions and structural growth tailwinds favoring Indian stock markets. The message from experts is clear: while precious metals are essential for diversification, the long-term wealth creation story still lies with equities.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
