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.

Gold prices extended their winning streak for a fifth consecutive session on January 23, while silver demonstrated strong outperformance with a sharp surge. The precious metals rally gained momentum from a weaker US dollar and shifting risk sentiment as geopolitical tensions showed signs of easing.

Market Performance and Key Levels

The latest trading session saw continued strength in precious metals markets. Key performance metrics highlighted the sustained bullish momentum across both gold and silver.

Gold's advance brought prices closer to the psychologically significant $5,000 per ounce mark, while silver's stronger percentage gain demonstrated its heightened sensitivity to market sentiment shifts.

Dollar Weakness Drives Precious Metals Higher

The primary catalyst for precious metals strength came from significant US dollar weakness. The greenback hovered near its lowest levels of the year after recording its biggest one-day decline in six weeks. This currency movement provided fundamental support for dollar-denominated commodities like gold and silver by making them more affordable for international buyers.

The dollar's retreat coincided with stable Treasury yields, with the US 10-year yield holding around 4.247%. This yield environment, combined with currency weakness, created favorable conditions for non-yielding assets like precious metals.

Geopolitical Risk Reduction Supports Market Sentiment

Precious metals also benefited from reduced geopolitical uncertainty following policy statements from US President Donald Trump. Markets took comfort from Trump's decision to dial back tariff threats on European goods and his ruling out of taking control of Greenland by force. These developments helped stabilize risk assets while maintaining support for safe-haven precious metals.

Societe Generale analysts noted that while immediate tensions eased, "policy uncertainty remains high," cautioning that further policy direction changes could still emerge and impact market dynamics.

Central Bank Policy Expectations

Central bank policy outlook continued to influence precious metals sentiment. Market expectations centered on policy stability across major economies:

• Federal Reserve: Fed funds futures indicated a 96% probability of unchanged rates at the January 28 meeting
• Bank of Japan: Traders widely expected rates to remain unchanged at the latest policy meeting
• Policy Impact: Stable rate expectations kept yields and dollar strength in check

Analyst Perspectives and Market Outlook

NS Ramaswamy, Head of Commodity & CRM at Ventura, identified gold as entering 2026 with strong momentum while approaching a critical long-term inflection point. He highlighted several supportive factors including monetary conditions, safe-haven demand, trade frictions, supply constraints, ETF inflows, and central bank diversification from US assets.

However, Ramaswamy also cautioned about potential headwinds such as profit-taking from overbought levels, easing geopolitical tensions, stronger US economic data that could push yields higher, dollar strength, weaker physical demand due to elevated prices, and slower central bank purchases.

Ravi Singh, Chief Research Officer at Master Capital Services, advised investor caution due to market volatility. He suggested staggered allocation strategies, such as monthly SIP-style investing to average costs, while emphasizing precious metals' role primarily as diversification tools rather than return-focused assets.

Traders are now monitoring upcoming global economic indicators, particularly US inflation data, for guidance on future interest rate and dollar direction. With gold approaching the $5,000 psychological milestone and silver showing robust momentum, near-term price action will likely depend on whether current risk sentiment stability continues or policy uncertainty re-emerges.