Following exceptional returns in the previous year, precious metals may be entering a phase of more conservative performance in the coming year. Market expert Dhiren Shah, smallcase manager and Co-Founder of Kamayakya, suggests that gold and silver investors should temper expectations for the year ahead, despite the metals' strong showing with a 10% gain in the previous year.

Precious Metals Outlook

Shah emphasizes that gold and silver have performed extremely well over the last 18 months but may not deliver such exponential moves in the coming year. The expert points to several critical factors that could determine precious metal performance.

The analysis suggests that much of the precious metals' returns may depend on these three fundamental drivers, potentially marking a shift from the momentum-driven gains seen in recent periods.

Market Context and Performance

The precious metals sector has experienced a remarkable run, with both gold and silver outperforming by wide margins in the previous year. This exceptional performance followed a broader trend of strong returns over an 18-month period, establishing precious metals as standout performers in the commodities space.

Shah's assessment comes at a time when markets have hit fresh record highs, with the expert noting that current market conditions suggest a more measured approach to precious metal investments going forward.

Broader Market Implications

The expert's outlook on precious metals aligns with a broader shift in market focus toward earnings, valuations, and stock-specific opportunities. As global markets navigate changing monetary policies and geopolitical uncertainties, precious metals are expected to maintain their role as portfolio diversifiers, albeit with potentially more modest returns.

Shah emphasizes the importance of monitoring central bank policies and geopolitical developments, as these factors will likely drive precious metal price movements more than speculative momentum in the coming year.

Investment Considerations

For investors considering precious metals exposure, Shah's analysis suggests a more nuanced approach may be necessary. Rather than expecting the outsized returns seen in the previous year, investors should focus on the fundamental drivers that support precious metals as portfolio components.

The expert's perspective highlights the cyclical nature of precious metal performance and the importance of understanding the underlying factors that drive long-term value in gold and silver markets. As global economic conditions continue to evolve, precious metals are expected to remain relevant investment options, though with potentially different return profiles than recent years.

Precious metals may see measured returns in the coming year after blockbuster performance in the previous year. Geopolitics, Fed policy, and central bank actions remain key potential triggers for gold and silver prices ahead.

Silver has delivered exceptional returns, with prices surging over 160% in 2025 as COMEX crossed $75.00 per ounce and domestic rates exceeded ₹2.30 lakh per kilogram. According to Motilal Oswal Financial Services Ltd, this rally represents a structural shift in the global silver market, driven by tangible physical market dynamics rather than speculative euphoria. The precious metal's journey represents one of the most significant wealth creation stories, with multiple structural factors creating visible imbalances in the physical market.

Supply-Demand Fundamentals Drive Structural Rally

The underlying driver appears to be structural deficits rather than speculative positioning. Motilal Oswal's report "Silver Unchained!!!" highlights that 2025 marks the fifth consecutive year of physical deficit in the market, with mine supply unable to meet combined demand. The global silver market continues to face projected shortfalls exceeding 100 million ounces.

This deficit is difficult to bridge quickly as most silver is produced as a by-product of copper, zinc, and lead mining, which limits supply flexibility. Ore grades are reportedly declining, and new mines typically take over a decade to become operational.

Inventory Drawdowns Signal Physical Tightness

COMEX and Shanghai silver inventories showed persistent drawdowns throughout the year, with registered stocks falling sharply while Shanghai physical inventories reached decade-low levels. This sustained shortage led to a widening premium of $5.00-$8.00 for Shanghai spot prices over COMEX futures, highlighting stress on traditional arbitrage mechanisms.

Late in 2025, COMEX experienced a "vault drain crisis," with over 60% of registered silver claimed for delivery within four trading days, underscoring the growing gap between outstanding futures contracts and physical availability. The disconnect between paper pricing and deliverable metal has become a key factor driving prices.

China Export Controls Intensify Supply Concerns

China's role in the global silver supply chain has intensified market tightness. As one of the largest refiners and net importers of silver, Chinese inventories saw steady declines. Proposed export licensing requirements from January 2026 are expected to further restrict global metal flows, adding another layer of supply-side concern to the market.

Industrial Demand Provides Structural Support

Silver continues to see strong industrial demand, especially in solar panel manufacturing, electric vehicles, electronics, and medical applications. Estimates suggest that 50-60% of silver demand now stems from industrial use, with applications spanning clean energy projects, solar installations, data centers, and electrification initiatives.

Motilal Oswal's Investment Strategy and Outlook

Navneet Damani, Head of Research – Commodities at Motilal Oswal, said, "Silver's rally in 2025 is shaped by real metal scarcity. Physical deficits, policy-driven supply constraints, and concentrated inventories are increasingly dictating prices, marking a structural change in global silver trading."

Manav Modi, Commodities Analyst at Motilal Oswal, added, "Persistent inventory drawdowns across key hubs and weakening arbitrage between Shanghai and COMEX have exposed the limited availability of deliverable silver. The sustained premium in physical markets reflects genuine supply tightness rather than temporary pricing inefficiencies."

Motilal Oswal maintains a buy-on-dips approach, projecting silver to reach $77.00 on COMEX and ₹2.46 lakh domestically, with further revisions dependent on evolving supply-demand dynamics and policy developments.