This Dhanteras, the pocket may pinch a little more.
Both gold and silver are trading at record highs, and physical markets are struggling to keep pace. Dealers report delivery delays, global mints are running behind schedule, and in India, silver is quoting around ₹1.9 lakh per kilo, nearly 10% above spot rates. Some ETFs have even paused new inflows as physical supply tightens.
Gold has crossed ₹1.3 lakh per 10 grams, while silver has broken past its decade-old ceiling of $50. Central banks are buying at the fastest pace in modern history, adding over 1,000 tonnes of gold annually, led by China, Turkey, and India.
Over the past few years, money supply across major economies has expanded at a pace rarely seen before. Wars, fiscal stimulus, and rising debt have flooded financial systems with liquidity. The outcome is visible everywhere — inflated balance sheets, rising asset valuations, and a quiet erosion of faith in paper currencies.
This is the backdrop against which gold and silver have reclaimed investor attention. Their appeal today is not sentimental. It lies in their ability to act as stores of value when policy credibility comes into question.
But gold did not earn that role overnight. Its relationship with money and power has been built over centuries, tested in every economic crisis, and redefined each time global finance changed course. To understand what makes it relevant again, we need to start at the point when gold stopped being money and became something even more enduring.
In this edition, we will unpack:
- The current context
- Why the world keeps coming back to gold
- The six forces driving gold’s re-rating
- The silver squeeze: industrial demand meets structural shortage
- The Dezerv view: how precious metals fit into a modern portfolio
Let’s begin.
The current context
Global markets are behaving in ways that defy logic.
Equities are posting new highs. Gold is at record levels. Cryptocurrencies have rebounded. Industrial metals are climbing. Property prices are firm, and even alternative assets like art and collectibles are seeing record bids.
These asset classes usually move in different directions. Yet today, they are all rising together.
That convergence tells us something fundamental: investors are not merely positioning for growth; they are hedging against currency debasement, i.e., the gradual loss of money’s real purchasing power. When both growth and safety assets perform well, it often points to a deeper concern: the stability of money itself.
Why the world keeps coming back to gold
Gold’s relationship with the monetary system has always been cyclical.
Each time the financial world believes it has outgrown gold, it ends up returning to it.
After World War II, global leaders built a new monetary order at Bretton Woods. The arrangement was elegant in design: the US dollar became the world’s anchor currency, convertible into gold at $35 an ounce, and every other currency was pegged to the dollar. It was an age of discipline — money creation was limited by how much gold a country held.
That discipline collapsed in 1971, when President Richard Nixon suspended gold convertibility to finance war spending and widening fiscal deficits. The world’s currencies became fiat money, backed not by reserves, but by the credibility of governments and central banks.
In the short run, this freedom expanded growth. It allowed economies to borrow, invest, and recover faster. But over time, the absence of restraint encouraged excess. Debt grew faster than output, fiscal prudence weakened, and monetary policy became a tool to manage politics as much as economics.
Each time that confidence in this system has been tested — the oil shocks of the 1970s, the 2008 financial crisis, the pandemic stimulus — investors have rediscovered gold. It stopped being currency and became something more telling: a barometer of trust in policy.
In India, gold is not an investment trend; it is part of our culture. It moves through generations — bought at weddings, gifted during festivals, pledged in emergencies, and never really sold. Over time, this habit has created one of the largest private pools of wealth in the world.
Morgan Stanley estimates that Indian households now own gold worth nearly $3.8 trillion. With domestic prices near ₹1.3 lakh per 10 grams, the rally over the past year alone has added close to $800 billion in notional wealth.
It explains why gold’s relevance in India rarely depends on market cycles. Long before asset allocation became a framework, households already understood the idea of preservation.
That intuition has clear merit when viewed through long-term data. Looking back over four decades of data, equities have delivered about 15% a year, and gold around 12%. Once dividends, storage costs, and taxes are accounted for, equities still come out ahead.
Gold preserves your purchasing power; equities grow it. Both have a job. Confusing the two is how portfolios drift.
The six forces driving gold’s re-rating
Gold’s rally is not about fear or speculation. It is a repricing of trust in a financial system stretched by debt, liquidity, and politics. When the foundations of paper money weaken, the anchor metal inevitably revalues.
Six global forces are behind that shift, each one pointing to the same conclusion: the credibility of fiat money is being questioned.
a) Credibility of fiat questioned
Global debt has reached roughly $340 trillion, while world GDP stands near $114 trillion — a leverage ratio of almost 300 percent. In the United States, federal debt alone has crossed $37 trillion, pushing debt-to-GDP ratios beyond post-World-War-II highs. For fifteen years, quantitative easing has substituted for fiscal discipline, expanding the money supply far faster than real output.
b) Post-sanctions reserve anxiety
The 2022 freezing of Russia’s dollar reserves ended the assumption that sovereign assets held abroad are risk-free. For many central banks, it underlined that reserve safety is political, not absolute, forcing a rethink of what constitutes true liquidity.
c) Central-bank diversification
The institutional response has been decisive. Central banks have added over 1,000 tonnes of gold annually, led by China, Turkey, Poland, and India, the fastest accumulation in modern history. It marks a deliberate reduction of exposure to U.S. Treasuries and dollar assets.
d) Persistent geopolitical risk
Armed conflicts, supply-chain realignments, and industrial policy are fragmenting global trade. In a world where even payment networks can be weaponised, gold’s neutrality is strategic, it remains acceptable collateral under any regime.
e) Inflation uncertainty
Headline inflation has moderated, but underlying pressures from energy transition costs, fiscal expansion, and wage resets remain sticky. Real yields appear positive at first glance, but when adjusted for long-term inflation expectations, they turn negative. Gold prices continue to mirror that disconnect.
f) Reflexivity and momentum
Institutional accumulation has drawn retail flows, creating a feedback loop. Higher prices attract more inflows, strengthening the case for further allocation.
The silver squeeze: industrial demand meets structural shortage
Silver’s rally this year is rooted in fundamentals. Prices have finally broken through the $50 an ounce resistance that held for over a decade. Unlike past spikes driven by speculation, this breakout reflects real industrial demand colliding with constrained supply.
The gold-to-silver ratio shows how many ounces of silver are needed to buy one ounce of gold.
A higher ratio means silver is cheap compared to gold, while a lower ratio means silver is expensive relative to gold.
Historically, this ratio has averaged around 65 to 70. During periods of stress or weak industrial activity, it rises as investors prefer gold’s safety. When confidence returns and industrial demand for silver picks up, the ratio falls. As the chart shows, the ratio spiked to nearly 120 during the 2020 pandemic, reflecting extreme stress and liquidity hoarding. Since then, it has narrowed steadily toward 80, indicating that silver is catching up as industrial demand strengthens and investment flows broaden.
Industrial demand is driving the cycle
In the past decade, nearly all incremental silver demand has come from industry. Over 70% of that growth is linked to solar energy applications. Each gigawatt of new solar capacity requires roughly 25 kilograms of silver, and the International Energy Agency expects annual installations to double by 2030. Electric vehicles, power electronics, and data-centre infrastructure add further pull.
Supply has failed to keep pace. Global mine output has been largely flat for four years, while recycling volumes have plateaued. The result is a multi-year physical deficit, with exchange inventories at their lowest since 2016. Industry reports describe the current shortage as unprecedented in scale and duration.
Reserve and institutional buying adds pressure
Sovereign and institutional accumulation have compounded the squeeze. Middle-Eastern and Asian banks, including Saudi institutions, have been buying physical silver as part of broader reserve diversification away from the US dollar. ETF inflows have surged as investors seek higher-beta exposure to gold’s momentum, further tightening available supply.
A new phase for the metal
Local silver prices in India are quoting at a visible premium to spot, and several funds have temporarily restricted new inflows to maintain physical backing. These dislocations highlight how demand has outstripped deliverable metal.
In summary, silver’s story is about industrial relevance in a world rewiring its energy and technology infrastructure. The energy transition has become silver’s largest growth engine and the shortage on the ground shows how quickly that reality is being priced in.
The Dezerv view: how precious metals fit into a modern portfolio
Asset allocation is not about predicting what will rise next; it is about ensuring that something in your portfolio is always working. That is the role precious metals play.
In most portfolios we review, exposure to precious metals is surprisingly low. Investors tend to optimise for growth through equities and debt, but rarely allocate enough to assets that provide stability.
Our research suggests an optimal allocation of ~10–15%to precious metals. The objective is not to chase returns but to build resilience, to ensure that part of your wealth compounds steadily even when markets don’t.
Over the past two decades, gold has shown a negative correlation of –0.28 with equities. In years when equity markets were muted or negative, gold often provided meaningful offsets. In addition, because it is priced globally in dollars, gold also acts as a natural hedge against rupee depreciation.
In practical terms, our analysis shows that even a 7% allocation to gold, within an otherwise equity-heavy portfolio, can materially improve long-term risk-adjusted returns. A 7% sleeve would have reduced portfolio volatility by nearly one-third during drawdowns while preserving compounding over the full cycle.
That is why our preferred approach is rooted in balance:
- Maintain a strategic core allocation of 10–15 percent to precious metals.
- Within that, gold forms the anchor, and silver adds tactical exposure when industrial cycles support it.
Wealth creation has never been about predicting the next cycle. It has always been about surviving every one of them. Cycles will keep changing — interest rates, growth, inflation, even asset leadership. What should stay constant is the discipline behind a portfolio. Precious metals play a small but critical role in that structure. They preserve purchasing power, smooth volatility, and make it easier to stay invested when the world looks uncertain.
In summary
Gold is timeless.
For generations, financial security has sat at the heart of our culture. Long before formal markets or investment frameworks existed, Indian households had already found their way to it, through the simple act of saving in gold.
What began as tradition was, in hindsight, a remarkably sound financial instinct. When other assets didn’t exist, gold was the store of value, the emergency fund, and the family balance sheet rolled into one. It carried not just monetary worth, but trust — something that has proved more enduring than any currency or cycle.
Even today, in a world of digital wealth and global portfolios, the yellow metal continues to fascinate me. It reminds us that while innovation keeps changing how we create wealth, the principles that preserve it remain the same.
Wishing you and your family a warm, peaceful, and prosperous Dhanteras and Diwali.
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