“…for precious metal has been central bank demand for gold and industrial, plus potential central bank demand in silver. The prices of these commodities cannot be evaluated on a fundamental basis like equity shares because there is no cash flow, there is no dividend, and there is no bonus. You have to evaluate based on perceived value. And as long as central banks continue to buy gold, prices can go higher,” Shah said.
The Kotak AMC MD noted that factors such as a weakening dollar and lower US interest rates will further support precious metal prices. “Undoubtedly, when the dollar weakens and interest rates come down in dollars, commodity prices get supported. Lower Fed interest rates will be positive for precious metals. Weakening of the dollar will also be positive for precious metals. More importantly, as long as the US policy remains unpredictable, like they froze Russian FX reserves in post-Russia-Ukraine war, certainly that kind of unpredictability is pushing central banks to diversify into precious metals.”
Shah emphasised that while exact price targets are difficult due to geopolitical and central bank actions, gold and silver remain critical for portfolio diversification.
“Now every month we are watching what the industrial demand in silver is, what is the demand-supply equation, what is the central bank buying. As long as these factors are favourable, we will continue to remain bullish on gold and silver,” he said.
He also addressed Kotak AMC’s temporary suspension of fresh inflows into its Silver Fund of Fund, citing premium valuations and festival-driven supply constraints, while clarifying that the underlying Kotak Silver ETF continues trading on exchanges.”Our Kotak Silver ETF, being a listed security, does not have suspension or temporary suspension, so it continues to trade on exchanges. Kotak Silver ETF Fund of Fund, which goes and invests into that ETF that we have suspended only for lump sum purchase,” he said. Looking ahead, with continued central bank purchases, a potentially weaker dollar, and supply-driven premiums, gold and silver are likely to remain attractive for investors seeking strategic hedges and long-term diversification in volatile markets.
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