Silver’s 216% rally triggered a rush among investors
Naren cited the extraordinary interest in gold and silver exchange-traded funds (ETFs) in January 2026 as an example of performance chasing. Inflows into these ETFs during the month exceeded the money invested in equity mutual funds, an occurrence he described as unprecedented.
Silver had delivered a staggering 216% return, making it difficult for investors to resist the temptation of joining the rally. Naren said he had repeatedly cautioned investors against treating silver as an asset that could only move upwards. He compared its risk profile to that of small-cap stocks, which can experience sharp price movements.
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However, investors continued to justify their enthusiasm by pointing to silver’s industrial applications, its potential use in artificial intelligence and supply shortages.
The subsequent correction demonstrated the risks of entering an asset after a sharp rally. Silver fell 27% from its peak, reinforcing Naren’s warning about chasing momentum.
Gold attracted similar interest, although ETF inflows were relatively lower than those into silver. Naren attributed the difference partly to their previous returns. Gold had gained 116%, compared with silver’s 216%. Gold also peaked in January before declining.
Why Naren believes investors are getting asset allocation wrong
According to Naren, this behaviour is not restricted to precious metals. He pointed to investors turning their attention to South Korea’s stock market, represented by the Kospi index, after its strong performance.
The pattern, he said, is repeated across markets: investors rush towards assets that have already generated substantial returns, while avoiding those that have corrected and become unpopular.
Naren believes genuine asset allocation involves investing in an asset class after a correction, when valuations become more attractive and investor sentiment is weak. However, this requires patience and conviction, unlike buying an investment that everyone is already talking about.
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Why Naren is not turning negative on gold
Despite cautioning against chasing gold, Naren does not believe the metal has lost its long-term investment appeal.
He pointed to changing central bank reserve strategies as an important factor supporting gold. Following the freezing of Russia’s foreign reserves after the Ukraine war, central banks began reassessing their dependence on currencies such as the US dollar and increasing their interest in gold as an alternative reserve asset.
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Naren believes this structural shift could support gold prices and prevent the metal from returning to its earlier relative valuation levels.
However, he does not recommend putting an entire portfolio into gold. His broader message is that investors should maintain exposure to different asset classes rather than concentrate investments in whichever asset has performed best recently.
For investors, the distinction is important: having gold in a portfolio is different from increasing exposure simply because its prices have rallied. Disciplined allocation and periodic rebalancing, rather than performance chasing, remain central to long-term wealth creation.
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