Investing in both gold and silver, with a ratio tailored to your risk appetite, can enhance portfolio stability

In the latest episode of Outlook Money’s Investment Made Easy webinar series, hosted by Versha Jain from Outlook Money, industry experts Chintan Haria, Principal Investment Strategy at ICICI Prudential AMC, and Bharat Pareek, Head- Product & Segment, Private Wealth at ICICI Securities, shared their insights on gold and silver ETFs. This session was spearheaded by ICICI Prudential Asset Management Limited as part of their investment awareness initiative.

Gold And Silver Market Surge

The session opened with an overview of the impressive surge in gold and silver prices this year, attributed to geopolitical tensions, expectations of US Federal Reserve interest rate cuts, and central banks’ gold buying. Haria explained the benefits of investing in gold and silver through ETFs, stating, “Investors can gain from the price movements of gold and silver without the hassle of physical storage.”

Understanding Gold And Silver ETFs

Haria further elaborated on how gold and silver ETFs function, highlighting their user-friendly nature for retail investors. “Gold ETFs have been around for 15 years, and the introduction of silver ETFs in 2022 has broadened investment opportunities. These ETFs hold physical gold and silver in vaults, ensuring purity and regulatory compliance,” he said.

The Factors Behind Price Movements Pareek offered a historical outlook on the factors driving the surge in prices of these metals. He pointed out the transition in central banks’ strategies since 2010, shifting from USD to gold, and underscored the advantages of diversification. “Gold is now seen as a crucial store of value, especially amidst geopolitical volatility,” he explained.

Comparing Gold And Silver As Safe Havens

Addressing the question of whether silver can be considered a safe haven like gold, Haria pointed out the distinct roles these metals play. He said, “While gold is a traditional safe haven, silver’s increasing industrial applications in EVs, 5G technology, and solar panels make it a unique investment opportunity.”

Investment Strategies And Volatility

The discussion also covered the liquidity and volatility of gold and silver ETFs. Pareek mentioned, “Gold ETFs are more liquid due to their longer market presence, but silver ETFs are catching up fast.” Adding to this, Haria stated, “Silver is inherently more volatile due to its industrial demand and less recycled supply. However, this volatility may decrease as demand stabilises.”

Taxation and Portfolio Diversification

Regarding taxation, Haria acknowledged the changes after April 2023, particularly the withdrawal of long-term capital gain tax advantages for gold and silver ETFs. He stressed their significance in diversifying a portfolio, and advised, “A 10-15% allocation in gold and silver can hedge against inflation and global uncertainties”.

A Balanced Approach

The session concluded with practical advice for investors. Pareek recommended a balanced approach, stating, “Investing in both gold and silver, with a ratio tailored to your risk appetite, can enhance portfolio stability.” Haria concurred, suggesting, “For those new to these metals, a 70-30 allocation between gold and silver is a good starting point.”

The discussion provided clarity on the benefits and considerations of investing in gold and silver ETFs, underscoring the importance of diversification and informed decision-making in today’s volatile market.

Disclaimer

The information set out above is included for general information purposes only and is not exhaustive and does not constitute investment or tax advice.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme