Equities vs Precious Metals: Recent movements across global markets have revived the debate among investors: should portfolios tilt toward equities or continue riding the momentum in precious metals?
Insights from a recent report by Edelweiss Mutual Fund suggest that while precious metals have delivered strong returns recently, equities may be approaching a potentially favourable phase over the medium term.
Precious metals deliver strong gains
According to the report by Edelweiss Mutual Fund, precious metals have experienced a significant rally over the past year. Gold and silver have both delivered strong gains, reflecting heightened investor demand amid global uncertainties. Commodity data in the report shows that gold prices have risen sharply over recent periods, with strong performance across multiple time frames. Silver has posted even stronger gains, highlighting the robust demand for safe-haven assets.
However, the report notes that despite this strong performance, precious metals have also witnessed a correction in early CY26, even though overall returns remain in positive territory. This suggests that while the rally has been impressive, momentum may be moderating after a prolonged uptrend.
| Time Frame | Spot Gold | Spot Silver | BSE Sensex | NSE Nifty 50 |
| 1 week | -2.4% | -8.1% | -3.6% | -3.7% |
| 1 month | 0.4% | 4.4% | -9.8% | -10.3% |
| 3 months | 16.5% | 25.4% | -10.5% | -11.8% |
| 6 months | 35.9% | 87.94% | -8.3% | -9.3% |
| 1 year | 68.01% | 136.84% | 3.4% | 1.2% |
| 5 years | 189.67% | 208.18% | 55.3% | 48.30% |
Gold and silver show strong resilience with massive long-term gains, while equities struggle in shorter horizons. Indian indices face steep declines over months, contrasting metals’ explosive growth, though equities still deliver solid five-year cumulative returns.
Nifty-to-Metals ratio signals possible inflection
One of the key indicators highlighted in the Edelweiss report is the Nifty-to-Gold+Silver ratio, which measures the relative performance of equities versus precious metals. Historically, this ratio has often marked important turning points between the two asset classes. When the ratio approaches its long-term support zone, the relative performance trend has tended to shift.
According to the report by Edelweiss Mutual Fund, the ratio recently reversed from near its long-term support level. In previous cycles, similar reversals have often preceded periods where equities begin to outperform precious metals. This development suggests that the relative advantage may gradually move back toward equities.
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Photo: ET Now DigitalEquities or precious metals? (Source: Edelweiss Mutual Fund Report)
Improving earnings outlook supports equities
The broader market backdrop also supports this possibility. The report maintains a constructive view on Indian equities over the medium to long term. Improving earnings visibility, moderating valuations in several segments, and strengthening macroeconomic conditions are seen as supportive factors for equity markets. After several quarters of earnings downgrades, recent results indicate improving profit growth across companies, particularly in mid-cap segments.
Additionally, several sectors could drive the next phase of equity performance. Consumption-linked sectors may benefit from rising real incomes and demand trends, while financial companies remain well-positioned due to improving credit growth and healthy asset quality. Capex-linked sectors are also expected to gain momentum as public and private investment cycles strengthen.
Near-term risks could keep markets volatile
While the outlook for equities appears constructive, the report cautions that near-term volatility may persist. Factors such as elevated crude oil prices, geopolitical tensions in the Middle East, and currency movements could create short-term fluctuations in financial markets.
At the same time, the report highlights that over the past decade, different asset classes have performed differently at various times. Precious metals, equities, bonds, and commodities have each had periods of outperformance. This pattern reinforces the role of a balanced portfolio that combines growth assets with defensive hedges.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
