The fund house said recent volatility in gold and silver prices reflects escalating tensions in the Middle East and broader global uncertainty, but underlying structural factors continue to favour the asset class over the long term.
Disruptions to key global trade routes and a rally in crude oil prices could push inflation higher across major economies, potentially boosting demand for safe-haven assets such as gold and silver, it noted.
The ongoing conflict involving Iran, the United States and Israel may also widen or persist longer than expected, adding to geopolitical fragmentation and market volatility.
Against this backdrop, Tata Asset Management advised investors to adopt a staggered investment strategy in precious metals, using price declines triggered by a stronger US dollar or easing geopolitical tensions as potential entry opportunities.
Central bank demand and investment flows support gold
Gold continues to hold a central role as a monetary hedge in global portfolios, particularly as concerns over fiscal deficits and currency stability persist.
Central bank purchases remain a key driver. Global central bank gold buying has nearly doubled over the past decade as countries diversify reserves away from traditional fiat currencies.
Investment demand has also stayed resilient in India. Gold exchange-traded funds recorded inflows of about $565 million in February, indicating sustained investor interest despite some profit booking after recent price gains.
Regulatory changes are also expected to influence flows. The Securities and Exchange Board of India has revised mutual fund scheme categorisation rules, allowing funds greater flexibility to increase exposure to gold and silver instruments within defined limits.
Silver demand rises as supply deficit deepens
Silver’s outlook is supported by both investment demand and its expanding industrial use.
More than 60% of global silver demand now comes from industrial applications, including electronics, solar energy and advanced manufacturing. Rising demand from China and other manufacturing hubs could keep prices elevated.
At the same time, supply constraints are tightening the market. Silver has entered its sixth consecutive year of structural supply deficit, a factor that analysts say has significantly strengthened bullish sentiment for the metal.
Inventories on the Shanghai Futures Exchange have also dropped close to 10-year lows, highlighting tight physical availability.
Gold may regain edge over silver
The Gold–silver ratio, which measures the relative value of the two metals, has rebounded after falling to multi-year lows.
The ratio recently recovered to around 56, suggesting gold has begun outperforming silver amid rising geopolitical tensions. Over time, the ratio could move toward the 70–72 range, largely due to stronger demand for gold during periods of global uncertainty.
Volatility likely despite bullish structure
Despite the constructive outlook, Tata Asset Management cautioned that precious metals may continue to experience sharp price swings.
Gold has recently rallied to record highs, while silver has also seen rapid gains driven by geopolitical risks, industrial demand and speculative flows. Such sharp moves are often followed by periods of consolidation.
Still, the fund house said the long-term structural pillars supporting precious metals—including geopolitical fragmentation, currency uncertainty, strong investment demand and persistent supply deficits—remain firmly in place.