Tata MF Advises 70-30 Gold-Silver Allocation Amid Volatility

Tata Mutual Fund (Tata MF) is advising investors to allocate 70% of their investments in gold and 30% in silver due to their respective volatility levels. The fund manager believes that gold's lower volatility makes it a safer investment, but also acknowledges the potential for short-term price movements. Gold has been recovering recently due to softer US economic data, a weakening dollar, and easing bond yields.

Tata MF experts point out that central bank purchases have reached 289 tonnes in the second quarter of this year, making it the strongest Q2 buying on record. They also highlight the increasing demand for gold as a hedge against macroeconomic uncertainty and currency debasement risks. On the other hand, silver's volatility makes it more exciting but also more prone to price fluctuations.

The fund manager advises investors not to chase rallies and instead suggests staggering investments over time. They emphasize that precious metals are not a one-way bet and rapid appreciation can be followed by sharp declines. The mismatch between demand and supply in the silver market is creating a powerful combination for the white metal, with China's control of 60-70% of refining capacity making it a significant factor.

Tata MF also cautions that gold prices can come under pressure from a stronger dollar, higher bond yields, and a more hawkish US Federal Reserve stance. Silver faces additional risks due to its dependence on industrial demand. The fund manager urges investors to approach silver with a staggered investment strategy and to consider using periods of market weakness to build strategic long-term allocations.