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Gold has always been considered a safe haven whenever there is a crisis-like situation in the world. Gold has already given 38% returns to date whereas silver has delivered a 35% return to date during the year. The main reason for this trend is that investors around the world are still very uncertain about other asset classes due to the current pandemic situation.

Let us try to understand why this is happening?

Why the prices of Gold are rising?

  • Investors around the world are still fearful of the future economic situation due to Covid-19. Many businesses remain impacted and overall economic growth may not pick up in the near future. Due to this, the attractiveness of market-linked assets declines. The geopolitical situation remains difficult with continued US-China tensions. 
  • More than 700 metric tons of gold have been added to vaults around New York this year, the most in records going back to 1993. Apart from these other developed countries are also buying gold for the last 6 months.

Why the prices of Silver are rising?

  •  On the other hand, Silver is widely used in industrial products like Electronics Equipments, Solar Energy, Healthcare and the current situation is very much favorable to the demand for these products and as a result for Silver. Solar energy expansion is increasing in the world, especially in India.
  • The lower mining volumes worldwide are also impacting the prices of Silver.

Our Views on Gold & Silver

For the last 6 months, we have been recommending Gold as part of the asset allocation in an investor’s portfolio. Gold should be around 10 to 15% of a portfolio in the mode of systematic investments either as SIP and STP.