Why Should Investors Still Hold Gold and Silver Despite Modern Criticism?
Gold and silver have been humanity’s oldest forms of money — valued not for the income they generate but for the stability and trust they represent. While critics argue that these metals are “non-productive” assets, history repeatedly shows that they act as insurance during times of financial uncertainty, currency debasement, and geopolitical stress.
Many investors question whether holding gold is worth it. After all, unlike equities or bonds, gold does not yield dividends, interest, or rent. Yet this very feature — being outside the financial system — is what makes it uniquely valuable when trust in fiat currency or institutions weakens. Let’s explore why the world continues to hold this ancient asset even in a high-tech, digital economy.
Understanding the Core Value of Gold
Gold’s price doesn’t depend on corporate earnings or central bank interest rates. Instead, it’s driven by its scarcity, extraction cost, and global trust factor. The total stock of above-ground gold in the world is finite — roughly 210,000 tonnes — and unlike fiat money, it cannot be printed at will. This scarcity is what underpins its enduring worth.
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As per estimates, the cost of extracting an ounce of gold currently ranges between $1,200 and $1,500. Historically, gold trades at about two to three times its extraction cost, which justifies its current range near $4,000 per ounce. When gold trades five to six times its extraction cost, it typically signals overvaluation and may warrant cautious positioning.
To understand how gold and silver compare with other asset classes, let’s examine their typical performance during economic cycles:
| Asset Class | Typical Behavior in Recession | Long-term Volatility |
|---|---|---|
| Gold | Rises as investors seek safety | Low |
| Silver | Follows gold but more volatile | Moderate |
| Equities | Fall due to earnings decline | High |
| Bonds | Rise when interest rates drop | Moderate |
Gold performs especially well when confidence in the U.S. dollar weakens. After the freezing of Russian reserves in 2022, several central banks began accumulating gold as a neutral reserve asset — signaling growing distrust toward the dollar’s long-term dominance. As a result, global central bank gold purchases hit multi-decade highs, pushing gold prices upward.
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Gold and Silver in Modern Portfolios
Portfolio managers often debate how much exposure investors should have to gold or silver. While equity markets generate compounding returns, precious metals serve as a stabilizer — providing insurance against inflation, currency crises, and systemic shocks. A well-known Portfolio Management Service (PMS) reportedly allocated 40% of its assets to gold and 60% to equities last year. This balanced strategy helped it outperform peers significantly, particularly during periods of global uncertainty.
To explain further, metals’ low correlation with equities means that when stock markets fall, gold often rises — offsetting part of the portfolio loss. This is the concept of hedging in finance, where one investment counters the movement of another.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, explains that while gold may not generate periodic income, it fulfills a vital role as a store of value and risk hedge. A portfolio diversified with 5–15% allocation to gold and silver can smoothen long-term returns and protect against monetary shocks. Investors should view precious metals as a form of financial insurance rather than a return-maximizing asset.
Discover more balanced investment insights and strategic allocation ideas at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Precious Metals
- How Do Central Banks Influence Global Gold Prices?
- Is Silver a Better Long-term Hedge Than Gold?
- When Does Gold Become Overvalued in Economic Cycles?
- How Much Gold Should You Hold in Your Portfolio?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
