Volatility lifts gold, sinks small caps in 2025

Global uncertainties, rising demand from world central banks and higher equity market volatility led to a substantial jump in gold prices in 2025. Moreover, its low correlation to risky assets makes it a superior option for risk diversification. On the other hand, the mid cap and small cap benchmarks performed the worst among asset classes in 2025 year-to-date. Concerns of high valuations, export growth uncertainties and pressure on profit margins due to a tepid demand environment led to their poor performance.

Based on the average and standard deviation of returns over the last 11 years, gold has a better risk-to-reward ratio compared to silver. In equities, the large cap segment has a better risk-toreward ratio compared to the mid and small cap segments.