Multi Asset Allocation: Importance of having gold and silver exposure

Current market context

The market is trading near its all time highs. Though the market has made a number of attempts to breakout from current range, we are seeing profit booking at upper end of the trading range. Continued FII selling and uncertainty about Indo US Trade Deal are headwinds for the market. The Russia Sanctions Bill threatening 500% tariffs on countries importing from Russia, has caused jitters in the market with Nifty falling by more than 1% after the Bill was approved by White House. On the debt side, the bond yields have surged despite bond purchases by the RBI, due to large supply of State Government debt. Precious metals on the other hand, continue to surge and make record highs.

Gold and silver's spectacular rally

In the last 2 years, gold prices have multiplied 2.1X to Rs 1.33 lakhs per 10 grams (as on 31^st December 2025). In CY 2025 itself, gold rallied by 75%.

Source: MCX spot prices, Advisorkhoj Research, as on 31^st December 2025

Silver saw an even more spectacular rally, multiplying 2.1X to Rs 2.3 lakhs per kg (as on 31^st December 2025). In CY 2025 itself, silver rallied by 167%.

Source: MCX spot prices, Advisorkhoj Research, as on 31^st December 2025

Outlook for gold and silver

1. Global Central Bank Buying: Central banks worldwide have been increasing their gold reserves


2. Falling Interest Rates: Lower global interest rates often support higher gold and silver prices, as investors seek alternatives to low-yield assets.


3. Geopolitical Tensions: Geo-political conflicts e.g. US military actions in Venezuela, instability in the Middle East etc drive investors toward safe-haven assets like gold and silver.


4. Technological Boom: Demand for silver is soaring due to its extensive use in renewable and high-tech industries.


5. Currency depreciation: Weakening rupee often prompts investors to purchase gold as a protective asset or safe haven and a hedge against currency fluctuations.

Gold, silver and equity have given similar returns in the long term

The chart below shows the growth of Rs 10,000 in gold, silver and equity (represented by Nifty 50 TRI). You can see that while gold outperformed Nifty, even if we exclude the last 1 year growth, gold and Nifty had similar appreciation. Silver also had similar appreciation and while silver underperformed versus gold and Nifty in the last few years, silver caught up and outperformed in CY 2025.

Source: MCX spot prices, NSE, Advisorkhoj Research, as on 31^st December 2025

Multi Asset Allocation Funds

Traditional asset allocation refers to diversifying your portfolio with allocations to equity and debt based on your risk appetite. However, inclusion other asset classes e.g., commodities (gold, silver), international equities etc, can provide richer diversification to your investment portfolio. Multi asset allocation funds provide the benefit of three or more asset classes in a single product. As per SEBI's mandate multi asset allocation funds must have minimum 10% exposure in each asset class, with at least 3 or more asset classes in the underlying portfolio of the scheme.

Why invest in multi asset allocation funds?

• Winners rotate across asset classes: The chart below shows the calendar year returns of different asset classes over the last 15 years. You can see that equity outperformed gold 7 times and gold outperformed equity 8 times in the last 15 years. A multi asset allocation strategy will provide stability to your investment portfolio.
  
  

  

  Source: MCX spot prices, NSE, Advisorkhoj Research, as on 31^st December 2025. Equity is represented by Nifty 50 TRI, debt by Nifty 10 year Benchmark G-Sec Index, Gold and Silver by MCX spot prices of respective commodities



• Improve portfolio risk adjusted returns: The charts below shows the median and standard deviation of rolling returns for different tenures over the last 20 years. You can see that gold can provide superior risk / return trade-off compared to equities in the short to medium term.
  
  

  

  Source: MCX spot prices, NSE, Advisorkhoj Research, as on 31^st December 2025



• Equity and gold are usually counter-cyclical: Gold outperforms when equity underperforms and vice versa (see the chart below). Therefore, asset allocation to equity and gold will bring more stability to your investment portfolio.
  
  

  

  Source: MCX spot prices, NSE, Advisorkhoj Research, as on 31^stDecember 2025



• Limits portfolio drawdown in market corrections: The table below shows the biggest market corrections over the last 20 years and drawdown of the Nifty 50 TRI versus gold returns during the drawdown. You can see that the gold gave positive returns in almost all the major corrections.
  
  

  

  Source: MCX spot prices, NSE, Advisorkhoj Research, as on 31^st December 2025



• Silver outperforms gold in certain market phases: Though gold and silver returns are correlated, silver outperforms gold in certain market phases.
  
  

  

  Source: MCX spot prices, NSE, Advisorkhoj Research, as on 31^st December 2025



• Exposure to 3 or more asset classes: You can get exposure to 3 or more asset classes e.g. equity, fixed income, commodities etc, in a single fund through multi asset allocation fund. You can rely on the expertise of a professional fund manager to manage the asset allocation of your fund and also do timely rebalancing.


• Tax efficient investments: Multi asset allocation funds with more than 65% equity allocation enjoy equity taxation. Long term capital gains (investments held for than 12 months) of up to Rs 1.25 lakhs are tax free and taxed at 12.5% thereafter.


• Tax efficient rebalancing: There is no tax incidence for you when the fund rebalances as opposed to tax events being triggered if you were rebalancing between asset classes in DIY investing.

Who can invest in Multi Asset Allocation Funds?

• Investors looking for a long-term strategic allocation to different asset classes


• Investors looking for relatively stable returns with low downside risks


• Investors with moderate to high risk appetites


• Investors with long investment tenures. We recommend minimum 3 years investment tenures for multi asset allocation funds.

Investors should consult with their financial advisors or mutual fund distributors if multi asset allocation funds are suitable for their investment needs.