Amid the ongoing volatility in precious metals markets, Emkay Wealth Management continues to maintain a supportive stance on gold and silver, citing that the medium-to-long-term outlook for these metals remains constructive, driven by strong underlying fundamentals.
Despite the ongoing tensions in the Middle East and a strong US dollar, Emkay says that gold trading near the $4,500 per ounce mark and silver rebounding around the $77 per ounce level reflect continued underlying demand and short-term price corrections.
Over the longer run, the firm says these precious assets remain supported by macroeconomic uncertainty, sustained central bank buying, and steady institutional allocation flows.
The brokerage added that it had added gold to its portfolio recommendation in FY23, while fund allocations for silver were initiated in February FY25.
Gold, silver: What’s driving the momentum
“Gold and silver are increasingly being viewed as strategic portfolio assets rather than short-term trading instruments. The current trend is driven more by structural allocation demand than speculative positioning,” Emkay Wealth Management said.
Emkay says expectations of rate cuts by the US Federal Reserve remain a key pillar supporting the upside for gold, as lower interest rates increase the appeal of non-interest-bearing assets. Investors tend to divert more towards bullion as lower interest rates reduce the opportunity cost of holding US Treasuries.
However, oil prices have surged over 40% since the start of the Iran war which has fuelled inflationary concerns. Marker participants currently weigh the possibility of a rate hike by the US Fed against a rate cut in the near future. Interest rates may remain higher for longer, posing headwinds for gold.
Still, consistent buying by central banks continues to drive the momentum for the yellow metal, Emkay said. It added that the silver additionally benefits from its growing industrial demand in sectors linked to the clean energy transition and manufacturing applications.
Gold, silver: Key levels to watch
The firm expects strong support for gold at the $4,000 per ounce level, with resistance at $3,890 followed by $3,510, while it maintains the upside target for the yellow metal at $4,800 and $5,200.
As for the silver, Emkay says near-term corrections could extend the shiny metal towards the $74 mark and also to $62. The brokerage pegs the white metal’s medium-term upside target at $92 and $110.
“However, the firm cautioned that the pace of gains may be moderated by inflation trends, the trajectory of US rate cuts, and movements in the US dollar,” it added in its report.
What is the recommended portfolio allocation?
For conservative investors, the brokerage has maintained an allocation guidance of 5% to precious metals, while for moderate investors, Emkay suggests gold and silver portfolio allocation to be somewhere between 10-15%, and for aggressive investors, the company recommends an exposure of up to 20% or more on a tactical basis, subject to periodic review.
For existing investors, Emkay recommends incremental investment during periods of market dips. However, it suggests investors with gold exposure of 25-30% review their portfolios for potential rebalancing. “Investors should remain disciplined in allocation rather than reacting to short-term price movements,” Emkay Wealth noted.