Gold and silver exchange-traded funds experienced a dramatic recovery on January 23, resuming their record rally after significant volatility in the previous trading session. Market analysts are now weighing in on optimal allocation strategies between these precious metals amid heightened market uncertainty.

Sharp ETF Recovery Highlights Market Volatility

Tata Silver ETF demonstrated remarkable resilience, rebounding over 17% to hit a day high of ₹33.00 per share after crashing up to 24% yesterday to a low of ₹25.56. This recovery represents a substantial 29% jump from the ETF's previous session low, highlighting the extreme volatility characterizing silver investments.

Groww Gold ETF emerged as the top performer among gold ETFs, jumping 7% to trade at ₹155.97 per share. According to Justin Khoo, Senior Market Analyst - APAC at VT Market, this sharp surge in both gold and silver ETFs reflects aggressive investor repositioning toward safe-haven assets amid heightened global uncertainty.

Silver's Exceptional Performance vs Gold's Steady Gains

Motilal Oswal Financial Services analysis reveals silver's extraordinary performance trajectory over the past 12 months. The white metal delivered an exceptional rally exceeding 200%, significantly outperforming gold's 80% rise during the same period, establishing silver as one of the strongest-performing assets globally.

This sharp outperformance has led to significant compression in the gold-silver ratio, falling from pandemic highs of 127 to approximately 50 at the beginning of 2025. The ratio reset suggests that while long-term precious metals outlook remains constructive, near-term risk-reward dynamics may be shifting in favor of gold.

Analysts Recommend Strategic Reallocation

Despite silver's impressive performance, market experts are advocating for a more balanced approach. Navneet Damani, Head of Research Commodities, and Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, emphasize that silver's recent rally has increased near-term volatility while gold continues offering relatively better stability.

Key Investment Recommendations:

• Portfolio Allocation: 75% gold, 25% silver
• Strategy Focus: Risk-managed reallocation after aggressive silver moves
• Near-term Preference: Gold as steadier hedge in uncertain conditions
• Long-term View: Maintain silver exposure for structural upside potential

The brokerage maintains a positive outlook on both metals but suggests this risk-managed reallocation strategy following silver's outsized run. Silver continues to have long-term upside backed by industrial demand and tight physical market conditions, but increased volatility warrants cautious positioning.

Market Flow Patterns Support Gold Preference

Global investment flows further support the analysts' recommendations. Despite sharp price surges, global silver ETFs have experienced outflows exceeding 3.00 million ounces since early 2025, while gold ETFs witnessed comparatively steadier inflows. This pattern reflects investor preference for more defensive positioning amid market uncertainty.

Aditya Agrawal, Chief Investment Officer at Avisa Wealth Creators, advises long-term investors to consider staggered allocation within asset allocation limits, while short-term traders should remain cautious amid continued volatility. The strategic approach balances silver's long-term structural theme with increased gold allocation to manage near-term volatility and capture potentially stronger risk-adjusted opportunities.

Indian silver exchange-traded funds experienced dramatic gains as the precious metal approached the psychological $100 barrier, with Tata Silver ETF leading the charge with a 17% surge. The rally comes as silver hit fresh record highs near $99 per ounce in international markets, recovering from previous day's profit booking amid supportive market conditions.

Silver ETF Performance Shows Strong Momentum

The silver ETF space witnessed significant activity across major funds during the trading session:

According to Jigar Trivedi, Senior Research Analyst at Reliance Securities, "Silver jumped nearly 3% toward $99/oz, reaching new record highs as a weakening dollar provided additional support to the rally in precious metals." The analyst noted that investors sought real assets as the dollar suffered from shifting US-Europe geopolitical dynamics and growing concerns about Europe potentially weaponizing its substantial US asset holdings.

Market Drivers Support Precious Metals Rally

The silver surge was supported by multiple fundamental factors including ongoing geopolitical risks, US dollar weakness, and market expectations of Federal Reserve rate cuts. The US Federal Reserve is widely expected to maintain current interest rates in the upcoming meeting, though markets continue pricing in two potential rate cuts later this year.

Industrial demand remains exceptionally strong from key sectors including solar energy, electric vehicles, AI infrastructure, and electronics. This demand has been further amplified by safe-haven flows and inflation-hedge positioning, while China's tightening export controls have added supply-side pressure.

Technical Outlook Points to Higher Targets

Ponmudi R, CEO of Enrich Money, provided an optimistic technical assessment: "Silver has surged to fresh all-time highs near $98. A decisive breakout beyond $99–$100 can quickly propel prices toward $102–$104 and beyond." The analyst highlighted that the medium-to-long-term outlook remains exceptionally bullish, with potential to test $110–$120 amid supply tightness and accelerating industrial consumption.

For domestic markets, MCX Silver continues to exhibit strong momentum with specific price targets:

Extreme Volatility Characterizes ETF Trading

Despite the overall positive momentum, silver ETFs have demonstrated extreme volatility with sharp swings in both directions. The funds experienced significant divergence from underlying asset prices, with ETF prices determined more by demand and supply of units rather than actual silver prices. Previous trading sessions saw silver ETF prices fall 20% amid panic selling, which was substantially sharper than the 2-3% decline in MCX prices.

This divergence underscores the volatile nature of silver ETFs, whose net asset values sometimes trade at abnormally steep premiums or discounts to their indicative NAVs. Market participants noted that the funds are known to swing violently in both directions.

Trading Strategy and Market Outlook

Manoj Kumar Jain of Prithvi Finmart expects continued volatility in gold and silver prices amid dollar index fluctuations, ahead of the Bank of Japan policy meeting and ongoing geopolitical tensions. The analyst provided specific trading levels for market participants:

Jain recommended buying silver on every dip until it holds ₹3,04,000 on a closing basis, with targets of ₹3,35,000-₹3,44,000-₹3,50,000. Trivedi added that MCX Silver March prices are likely to appreciate to ₹3,35,000 per kg in tandem with the positive undertone in world markets.