Gold and Silver Funds Deliver: Gold and silver mutual fund schemes—both Exchange-Traded Funds (ETFs) and Fund of Funds (FoFs)—have emerged as standout performers over the past year, riding the sharp rally in precious metal prices. While gold prices have climbed steadily, silver has stolen the spotlight, delivering exceptional gains and touching record highs.
Several gold-focused schemes have posted returns of over 80 percent in the last year, while silver ETFs have gone a step further, clocking gains of more than 200 percent. These numbers underline a clear shift—precious metals are no longer just a portfolio hedge but have become a key driver of returns for many investors.
Precious metals leave equities far behind
The contrast with equity funds is striking. Large-cap equity funds delivered returns of just over 9 percent, mid-cap funds managed around 6.6 percent, and small-cap funds ended the year in negative territory with losses of nearly 3 percent. Against this backdrop, gold delivered an impressive return of about 87 percent, while silver surged more than 210 percent, making it the top-performing asset class during the period.
The data clearly shows that while equities struggled to generate meaningful gains, investors with exposure to precious metals benefited from a powerful rally.
What’s driving the outperformance?
According to Satish Dondapati, Fund Manager at Kotak Mutual Fund, the strong performance of gold and silver funds is being driven by multiple global factors.
“Gold and silver funds have done well in recent months due to safe-haven demand, geopolitical tensions, and expectations of softer global monetary policy. Gold has offered relatively stable returns with lower volatility, while silver has outperformed significantly, albeit with higher price swings, supported by strong industrial demand and speculative interest,” he said.
The sharp rise in silver prices, in particular, has played a crucial role in lifting the returns of commodity-focused mutual funds and ETFs in India. As a result, many of these schemes have comfortably outperformed equity and hybrid fund categories over the past year.
Limited commodity diversification in India
However, experts point out that India’s commodity investment universe remains fairly narrow. Sachin Jain, Managing Partner at Scripbox, explained that most domestic commodity funds fall into two broad categories.
The first group includes precious metal funds and ETFs that offer direct exposure to gold and silver prices. The second consists of quasi-commodity funds, which invest in equity shares of commodity-linked companies such as metals, mining, and energy firms.
“These funds typically hold stocks of companies like Vedanta, Tata Steel, or other metal producers that benefit when commodity prices rise,” Jain said. “Their performance depends not only on commodity prices but also on company fundamentals, balance sheets, and overall equity market sentiment.”
Over the past year, however, precious metal funds have clearly outperformed quasi-commodity funds.
Can Indian investors access global commodity funds?
For Indian retail investors looking for global commodity exposure, direct options remain limited. There is currently no simple domestic route to invest directly in international commodity ETFs.
Experts say the primary way to access global commodity markets is through the Liberalised Remittance Scheme (LRS), which allows individuals to remit funds overseas—within prescribed limits—and invest in foreign exchanges offering commodity ETFs or futures-linked products.
Another option is investing through fund-of-funds structures that allocate money to global natural resource or commodity-related equity funds, such as mining or metals companies, rather than tracking commodity prices directly. These may include global natural resource or gold mining strategies.
“Some India-listed ETFs and mutual funds also provide indirect exposure by tracking global commodity indices or investing in international mining and metals companies. Investors should carefully evaluate factors like currency risk, taxation, costs, and volatility before investing,” Dondapati added.
Taxation remains a key consideration
Investors should also be mindful of taxation. Global fund-of-funds are not treated as equity funds for tax purposes in India. Instead, they are taxed under debt fund rules, which can significantly reduce post-tax returns, especially for those in higher income brackets.
As always, financial advisors suggest that precious metals should be viewed as part of a diversified portfolio rather than a standalone investment, with allocations aligned to individual risk appetite and long-term goals.