With gold-silver gap at 87 vs historic 67, is silver the better bet?

Gold, silver prices at record high

For years, silver has remained in gold’s shadow— valuable but never quite the star of the show. That perception is now changing. A confluence of factors has propelled silver into the spotlight, making it one of the most compelling investment stories in recent times.

For the first time in 15 years, silver has surged past $40 an ounce, sparking renewed investor interest. Around the same time, the United States added the precious metal to its list of critical minerals, recognising its role in industry and the need to secure supply chains.

These milestones reflect a fundamental shift in how silver is valued by markets and governments alike.

Silver is unique among precious metals because of its dual demand profile. While gold is almost entirely an investment asset, silver straddles two powerful drivers — safe-haven appeal for investments and its indispensable industrial uses.

Nearly 60 percent of the demand today comes from industry. Silver’s exceptional conductivity and versatility make it essential in solar panels, electric vehicle batteries, semiconductors, LEDs, and medical devices. In a world rapidly moving towards cleaner energy and advanced technology, silver is irreplaceable.

Demand-supply gap

Supply is struggling to keep up with the growing demand.

For five consecutive years, silver has been in deficit, with consumption consistently outpacing production. This imbalance is unlikely to correct quickly, which means prices are supported by structural fundamentals.

When demand is driven by both investors and industries, while supply remains tight, it creates a long-term tailwind that is hard to ignore.

Institutional recognition of silver’s importance as a part of the investment portfolio is also growing.

Recently, the Saudi Central Bank bought some silver ETFs. Last year, the Central Bank of Russia started buying physical silver, which was a big shift from its traditional purchases of gold.

This can be read as a signal that large players see value in diversifying into silver. Such moves not only add credibility but also deepen market participation.

Also read | Gold hits all-time high: Retail investors should adopt balanced approach, allocate 10-20% to the yellow metal

Test of metal

There is also a strong valuation argument. The gold-to-silver ratio, which measures how many ounces of silver equal the price of one ounce of gold, stands at around 87.

There is no cause/effect relationship between gold and silver directionally, so this ratio can just be kept in mind as an indicator.

Over the past 30 years, the median of this ratio has been around 67. This gap suggests that silver could be undervalued relative to gold. History shows that when this ratio reaches such extremes, silver often outperforms gold significantly in the years that followed.

For us as investors, this makes silver particularly attractive today. It offers the reassurance of being a precious metal that can act as a hedge in uncertain times, while also giving exposure to structural growth themes of cleaner energy, greener transport and advanced technology.

It is rare to find an asset that combines defensive qualities with growth potential in this way. Just like its potential for gains, silver is relatively more volatile and has historically seen sharper corrections as well.

Access to silver has also become far easier than in the past. You no longer need to worry about storing bulky bars or coins. Today, you can buy silver seamlessly through exchange traded funds or fund of funds, which track silver prices.

Digital platforms have further democratised this access, enabling you to add silver in small, convenient increments.

The case for silver today rests on three pillars: rising industrial demand, constrained supply, and relative undervaluation. Combined with easier access through prudently regulated digital products, silver has all the ingredients to be a strategic asset in modern portfolios.

So, while you are sitting with your trusted financial adviser for a periodic review of your portfolio in an uncertain, high-valuation world, do assess if silver can offer you a timely opportunity. It is no longer just gold’s understudy; it is a metal with its own story, its own strengths, and its own moment. That moment may well be now.