Whalesbook
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Precious Metals Face a Rebalancing Act
Amidst a backdrop of escalating global macro and geopolitical uncertainties, Motilal Oswal Financial Services has signaled a preference for gold over silver for near-term investment allocations. The brokerage's analysis highlights that silver's remarkable surge of over 200% in the past 12 months has significantly outpaced gold's approximately 80% rise, consequently narrowing the gold-silver ratio to around 50 from pandemic-era highs near 127. This compression suggests that a substantial portion of silver's 'catch-up' trade has already concluded, leading to a reassessment of its risk-reward profile.
Investor Flows Reveal a Flight to Safety
The market's evolving sentiment is underscored by shifting investor flows into exchange-traded funds (ETFs). Since the beginning of 2026, global silver ETFs have recorded outflows exceeding three million ounces, even as prices have remained elevated. In contrast, gold ETFs have consistently attracted steady inflows. This trend indicates a discernible rotation away from higher-beta assets towards traditional safe-haven assets, driven by rising global instability. Factors contributing to this unease include heightened tensions involving the US, Iran, and Venezuela, broader Middle Eastern risks, the lingering impact of tariffs, and concerns surrounding a potential US government shutdown.
Liquidity Fuels Demand for Stability
Expanding global liquidity, with US M2 money supply near $22 trillion and China's M2 exceeding ¥340 trillion (growing over 8% year-on-year), provides a foundational support for precious metals. This increased money supply injects liquidity into markets, potentially amplifying volatility and strengthening the demand for assets perceived as inflation hedges. While Motilal Oswal maintains a positive long-term outlook for silver, citing industrial demand and supply constraints, the brokerage views the current near-term setup as imbalanced following its recent dramatic rally. Silver's increased volatility and wider daily price swings contrast with gold's more stable trading trend, enhancing gold's appeal for risk-managed portfolios. Although physical silver markets exhibit tightness, with premiums in Shanghai and MCX (over COMEX) indicating stretched pricing, this does not necessarily signal robust underlying demand. Motilal Oswal suggests that a return of the gold-silver ratio towards its long-term average of approximately 70 from the current 50 implies relative gold outperformance, supporting a strategy focused on volatility management rather than a negative view on silver itself.
Market Performance and Outlook
As of January 23, 2026, gold is trading around $4,956.06 per ounce, having risen approximately 78.91% over the last 12 months. Silver, on the other hand, has seen a more dramatic ascent, reaching $98.79 per ounce on the same date, marking a 214.4% increase over the past year. The current gold-silver ratio hovers around 50. This shift in performance dynamics aligns with Motilal Oswal's observation of investor rotation. The brokerage notes that silver's price surge from ₹60,000 to ₹3.2 lakh has increased the probability of portfolio rebalancing by larger investors at current levels. While Motilal Oswal reiterates its positive long-term stance on precious metals, the near-term allocation strategy favors gold for its perceived stability amidst increasing macro uncertainty, with silver remaining a core holding for the long term.