Gold, Silver ETF Fund of Funds: Anchoring Your Wealth Amid Uncertain Times

Gold and silver ETF Fund of Fund first made their debut in the Indian mutual fund investment landscape over three years ago with the launch of Edelweiss Gold and Silver ETF Fund of Fund. Since then, several other fund houses have launched these funds.

And in the last couple of years, with the price of gold and silver on an upswing, inflows into gold and silver ETF fund of funds have advanced and, as a result, their AUM (which is approximately Rs 2 trillion as of December 2025). This is because amid the risk-off sentiments — caused by geopolitical tensions in various parts of the world, Trump 2.0 protectionist policies, rising global debt, higher tariffs, and economic uncertainty, among other factors — certain smart investors have seen value in these precious metals as a hedge in the portfolio.

In the case of silver, it is not just viewed as a precious metal but also as an industrial commodity. Today, it finds its application in automobiles (particularly in EVs), solar energy (for solar panels), batteries, satellites, semiconductors, 5G technology, medicines (due to silver's antimicrobial properties), medical instruments, chemicals, and much more.

Central banks, too, as part of their reserve management, are not just buying gold but even silver. Bank of Russia, the Saudi Central Bank, and the Reserve Bank of India (RBI) have been showing interest in silver, although these holdings are far less than gold.

Should you also consider gold and silver ETF fund of funds? Let's understand the characteristics of this investment avenue first.

Gold and silver ETF fund of funds are passively managed mutual funds investing in the underlying gold ETF and silver ETF. Typically, they allocate 95–100% of their total assets in the underlying units of gold ETFs and Silver ETFs, of which 35–65% are in units of Gold ETFs and 35–65% in units of Silver ETFs.

This allocation to gold and silver is intended to reduce concentration risk while participating in opportunities in both metals.
Gold works as a hedge, a safe haven or a store of value, while silver, due to its application in various industries today, helps to benefit from potential industrial-driven growth of the new age economy. This balances risks and captures trends across economic cycles. The remaining, i.e. up to 5% of its assets in money market instruments, cash and cash equivalents and/or units of liquid scheme, for liquidity purposes.

As a part of the investment strategy, the fund manager decides the allocation towards units of gold ETFs and/or silver ETFs, or, for that matter, holding money market instruments and/or cash equivalents. The investment objective is to generate returns by investing in units of Gold ETFs and Silver ETFs. However, the performance of the scheme may differ from that of the underlying gold and silver due to tracking errors of the underlying exchange-traded funds. There is no assurance or guarantee that the investment objective of the plan will be achieved.

How are the historical returns of gold and silver ETF Fund of Funds? The returns are closely linked to the prices of gold and silver. The Value Research data reveals that gold and silver ETF fund of funds have clocked 34.6% CAGR returns over the last 3 years (as of 9 January 2025).

The pioneering funds of this category — Edelweiss Gold and Silver ETF FoF and Motilal Oswal Gold and Silver ETFs FoFs — have clocked impressive 41.4% and 38.2% CAGR, respectively. Between 2022 and 2024, when interest rates reached their highest levels, the returns from the gold and silver ETF fund of funds remained moderate. However, in 2025, gold and silver delivered exceptional double- and triple-digit returns-approximately 76% and 160%, respectively, attracting considerable interest from investors.

What is the risk involved in gold and silver ETF fund of funds? Investing in gold and silver is not risk-free, particularly in the short to medium term. The capital market regulator has classified gold and silver ETF fund of funds as high risk. Both gold and silver are volatile asset classes. But silver is more volatile than gold.

Silver, as you know, in the current times derives its value from the industrial demand. It is a pro-cyclical commodity. Whereas gold is looked up to as a safe haven, a hedge, a store of value in the current uncertain times. In other words, it is counter-cyclical. 

Keep in mind that there have been periods or multi-year phases when gold and silver have moved flat (like 2016 to 2018) or delivered negative returns (like 2013 to 2015). Hence, don't make simplistic assumptions about return expectations.

Will the current supercycle for gold and silver continue in 2026? Gold is expected to fare well against the backdrop of the following:

• Ongoing geopolitical tensions in many parts of the world
• Trump 2.0 protectionist policies
• Trade wars
• Rise in global debt rose to US $ 111 trillion (t) in 2025, approximately 94.7% of global GDP, up from 92.4% in 2024.
• Macroeconomic uncertainty

Central bank gold buying gold purchases, recognising the looming risks, is also to work in favour of gold. The World Gold Council is also of the view that lower interest rates and a weaker dollar, paired with heightened risk aversion, would create a continued supportive environment for gold. 

As regards silver, given that the industrial demand for silver today is higher than the supply, it would bode well. As per the Silver Institute, silver's exceptional price performance and its favourable supply-demand backdrop have further reinforced investor confidence.

Gold-Silver Ratio at Attractive Level of 56

That being said, the gold-silver ratio (calculated by dividing gold's price by silver's price and serving as an indicator of their relative value) reveals that it has fallen to 56 -- its lowest point since 2021 -- which is something to watch out for, indicating a very rapid up move in silver. 
In other words, silver is relatively expensive compared to gold. It takes a few ounces of silver to purchase one ounce of gold.
How to approach gold and silver ETF fund of funds?
Don't get carried away and give in to the FOMO (Fear of Missing Out). 
Approach gold and silver ETF fund of funds tactically from an asset allocation standpoint. These funds, while they offer diversification into two precious metals, keep the cost of investing low and are simple and easy to invest in; it is important not to go overboard, particularly now when both gold and silver are at their all-time highs. 
It makes sense to SIP (Systematic Investment Plan) in these funds as against a lump sum, so that you can benefit from rupee-cost averaging and compounding.
Around 5-10% of your total portfolio may be held in gold and silver ETF fund of funds with a long-term view (of 10 years or more), considering that underlying gold and silver may move flat or encounter volatility.
Happy investing!

Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.

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