Gold has delivered impressive gains of over 11% in the opening weeks of 2026, driven primarily by strong financial investor flows rather than traditional physical demand patterns. Chintan Haria, Principal Investment Strategist at ICICI Prudential AMC, attributes this surge to sustained institutional interest and structural reallocation toward precious metals amid ongoing global political and macroeconomic uncertainty.

Strong Financial Flows Drive Performance

The precious metals sector has witnessed significant investor interest, with substantial fund inflows concentrated in gold and silver investments. Haria highlighted the magnitude of recent flows during his interaction with ET Now.

The investment strategist noted that this performance has naturally attracted momentum-driven investors. However, he observed a concerning trend where financial markets are now dominating physical markets, resulting in elevated premiums for financial gold products compared to physical gold prices.

Strategic Portfolio Case Remains Intact

Despite the recent rally, Haria maintains that gold retains its fundamental appeal as a portfolio diversifier. He outlined several structural factors supporting long-term gold allocation:

• Currency Concerns: Weakening trust in the US dollar due to elevated debt levels
• Historical Context: Gold underperformed for nearly a decade before recent resurgence
• Low Allocation: Average investor allocation remains at just 5-10%
• Diversification Value: Clear case for gold revaluation in current environment

The relatively modest allocation levels across investor portfolios suggest significant runway for strategic accumulation, according to the ICICI Prudential strategist.

Volatility Risks and Investment Approach

While maintaining a constructive outlook, Haria emphasized caution at current price levels. He noted that key supportive factors including US rate cut expectations, abundant global liquidity, and geopolitical uncertainty are already well-recognized and largely reflected in current valuations.

The strategist warned that investors should prepare for sharper price swings as gold continues its upward trajectory, emphasizing that risk management becomes increasingly important at these levels.

Investment Strategy Recommendations

Haria advised investors to approach gold as a strategic portfolio allocation rather than a momentum-driven trade. His recommendations focus on disciplined accumulation and risk-conscious positioning:

• Build gold exposure gradually rather than chasing recent performance
• Maintain focus on overall portfolio risk management
• View gold as long-term diversifier, not short-term speculation
• Prepare for increased volatility in future price movements

The investment strategist's guidance reflects a balanced approach that acknowledges gold's continued strategic value while recognizing the elevated risks associated with current price levels and increased financial market participation.

Motilal Oswal Financial Services believes gold is relatively better positioned than silver in the current market environment, as the sharp rally in silver has altered the near-term risk-reward equation for precious metals amid rising macro uncertainty.

Silver Rally Compresses Gold-Silver Ratio

In a January 21 commodities note, Motilal Oswal highlighted silver's exceptional performance over the past 12 months. The precious metal has delivered a rally of over 200%, significantly outperforming gold's roughly 80% rise during the same period.

The brokerage noted that this outperformance has compressed the gold-silver ratio to around 50 at the start of 2026 from pandemic highs near 127, signaling that a large part of silver's catch-up trade has already played out.

Investor Flows Show Rotation Pattern

The shift in precious metals dynamics is becoming evident in investor flows. Motilal Oswal observed that global silver ETFs have experienced outflows of more than 3 million ounces since the start of 2026, even as silver prices remain elevated. In contrast, global gold ETFs have continued to see steadier inflows, reflecting a gradual rotation away from higher-beta exposure toward safer havens.

Macro Uncertainty Drives Safe Haven Demand

The brokerage linked the change in investor preference to rising macro and geopolitical uncertainty. Key factors contributing to market unease include:

• Tensions involving the US, Iran and Venezuela
• Risks in the Middle East
• Delayed impact of tariffs
• Concerns around a potential US government shutdown

Motilal Oswal also pointed to expanding global liquidity as a key driver supporting precious metals, noting that US M2 money supply stands near $22.00 trillion and China's M2 has crossed about ¥340.00 trillion, growing at over 8% year-on-year.

Physical Market Dynamics and Valuation Concerns

While maintaining a positive view on silver's longer-term structural outlook supported by industrial demand and supply constraints, Motilal Oswal noted that the near-term setup looks more imbalanced after the rally. The brokerage flagged tightness in physical silver markets but warned that premiums may reflect stretched pricing.

On relative valuation, the brokerage noted that the gold-silver ratio typically averages near 70 over the long term and is currently near 50, a level it considers difficult to sustain. A move back toward 65-70 would imply relative outperformance of gold, supporting a tilt toward gold as a volatility-managed allocation strategy.

Strategic Positioning Recommendations

Motilal Oswal emphasized that it is not changing its overall stance on precious metals but expects near-term allocations to skew more toward gold while silver remains a long-term core holding. The brokerage noted that silver's rise increases the probability of portfolio rebalancing by larger investors at current levels, while gold continues to trade in a more stable trend, improving its appeal for risk-managed positioning.