Gold or Silver: Which precious metal to buy this Dhanteras for higher returns in long term?

It's that time of the year when you might be wondering which asset class to choose between gold and silver as the auspicious occasion of Dhanteras falls next week on October 29 (Tuesday). Traditionally, Gold and silver have long been regarded as strong investment choices, especially in times of economic uncertainty. Both metals have distinct qualities, and their performance over the past few years highlights their potential:

Here is a quick check on how gold and silver have performed over a period:

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Over the last five years, both gold and silver have delivered substantial returns. Gold futures have seen a return of 106.13 per cent, while silver futures have slightly outperformed gold with a return of 116.63 per cent. Looking at a more extended timeline, gold has historically delivered higher all-time returns, indicating gold's resilience and its long-standing reputation as a store of value.

However, when we zoom into recent performance, silver has demonstrated its strength, particularly in the past year. Silver's one-year return of 36.35 per cent surpasses gold’s 29.49 per cent. This trend continues when examining shorter periods: silver's return over the past six months stands at 21.57 per cent, more than double gold’s 10.18 per cent.

TRIVESH D, COO, Tradejini noted that the volatility in silver prices, driven by industrial demand and global geopolitical tensions, often results in larger price swings. Gold, on the other hand, tends to have more stable but still upward momentum. These fluctuations make silver an attractive option for investors willing to accept more risk in exchange for potentially higher returns, added TRIVESH.

Fundamentals backing gold and silver

Gold has always been seen as a safe-haven asset, particularly during periods of geopolitical tension and economic uncertainty. Recent developments, including the ongoing conflict in Eastern Europe and instability in the Middle East, have contributed to a surge in demand for gold. Its current price of Rs 79,583 per 10 grams in India reflects this rise. Investors are drawn to gold for its liquidity and its ability to hedge against inflation and currency devaluation. Moreover, gold is a popular choice during the festive season, especially around Dhanteras and Akshaya Tritiya, where demand traditionally spikes.

In the medium term, gold’s outlook remains positive. The Federal Reserve’s interest rate decisions and inflationary concerns could continue to drive gold prices upward. Additionally, investors view gold as a hedge against currency fluctuations, especially if the U.S. dollar weakens.

Silver hit a new record milestone of ₹1,00,000 (per 10g) in the spot market. It is currently trading at ₹1,025 per 10 grams, serving a dual purpose: as both a precious metal and an industrial commodity. The rising demand for silver in industries such as electronics, renewable energy, and medicine is a significant growth factor. Silver’s use in solar panels, batteries, and other green technologies positions it as a vital resource in the transition towards clean energy. This fundamental shift in global energy production could support silver prices in the medium to long term as governments and corporations invest heavily in sustainable infrastructure.

Despite silver’s inherent volatility, it has enjoyed a breakout, particularly in April 2024, when its price surged due to strong industrial demand and global political tensions. Silver’s higher volatility compared to gold means it may experience more frequent price swings, but for risk-tolerant investors, this could present opportunities for greater returns.

Medium-term outlook

Looking ahead to the medium term, both metals have solid fundamentals supporting further growth. Gold’s safe-haven status and silver’s industrial demand create a balanced outlook for both assets. With gold, investors can expect continued support from geopolitical tensions and inflationary pressure, while silver’s connection to industrial growth and clean energy transition offers promising upside potential.

What should retail investors choose for investment? Gold or silver 

For retail investors, the decision between gold and silver largely depends on individual risk tolerance and investment goals. Gold, with its liquidity and stability, is often considered a more conservative investment. It is easier to buy and sell, given its global demand and relatively stable price movements. For those looking to hedge against market volatility or inflation, gold provides a reliable option, especially during uncertain times like those we’re experiencing today. 

Silver, on the other hand, is a more volatile asset but offers a higher potential upside. Its industrial applications, particularly in the green energy sector, make it an attractive option for investors with long-term outlook. The technological shift towards renewable energy could continue to support silver prices, making it a compelling investment for those seeking higher returns and willing to accept the associated risk.

TRIVESH added that for retail investors, a neutral approach could involve diversifying investments in both gold and silver, balancing stability with growth potential. Allocating a portion to gold can provide a hedge against economic uncertainty, while a stake in silver offers the possibility of benefiting from industrial demand and the green energy boom.

Anuj Gupta, Head - Commodities & Currencies, HDFC Securities-echoing a similar view said, "Investors can add both gold and silver in a staggered manner in their portfolio, expecting uptrend in both the precious metals, as bullion may provide a hedge to their overall investment portfolio."

The expert advises a minimum allocation of 10-15 per cent towards precious metals in an investor's overall folio.