The Metals Boom Has a Split Personality — Nilesh Shah Explains
Nilesh Shah highlighted that the surge in gold is structural, driven largely by central banks diversifying their foreign exchange reserves amid changing geopolitical scenarios.
Metals have been one of the success stories in global markets in 2025, outweighing most other risk assets through exceptional returns. But the sharp rally has left investors questioning whether the trend will continue further going into 2026.
Addressing the recent volatility, Nilesh Shah of Kotak Mahindra Asset Management, in an interview with NDTV Profit, distinguished between the drivers of precious metals and industrial commodities.
Nilesh Shah highlighted that the surge in gold is structural, driven largely by central banks diversifying their foreign exchange reserves amid changing geopolitical scenarios.
"Post-Russia's freezing of $500 billion reserves post Ukraine invasion, every central banker is looking to diversify their asset base. The western central bankers have put 60-70% plus their reserves in gold. The eastern central banks led by China, Japan, and India, they haven't put even 15% of their reserves in gold," he said.
He noted that as long as this "diversification play" continues, gold prices will find support.
As far as silver is concerned, Shah pointed out that a mix of industrial demand from EVs and solar cells, in addition to rumours of buying by Russian and Saudi central banks, has been driving up prices. But he did warn abotu speculative froth.
"In silver undoubtedly, there is some amount of short covering so there could be a correction," Shah said.
Meanwhile, on the industrial metals front, such as copper, Shah remains cautious about their cyclical nature.
While they are currently benefiting from dollar weakness, he warned that high prices eventually lead to demand destruction or substitution.
"At a price people will replace industrial demand because otherwise cost will become prohibited," he said.
For investors looking at metal stocks, Shah offered counterintuitive advice: ignore traditional valuation metrics.
"In the commodities, many a times you have to buy when... valuation looks on the higher side because commodity prices are down... and you have to sell when valuations are looking cheap, commodity prices are high, (and) companies are making huge profit," Shah explained. "In the commodities sector, you have to ensure that you provide enough for cyclical."
