Even as stock markets struggle to eke out gains, the asset that has delivered big returns is Gold. Not surprisingly, the buzz is all about gold.
In all this excitement, Gold’s close cousin, Silver, is not getting much press. But the fact is that Silver is not falling behind in the race to become one of the best-performing asset classes in 2025. Gold is up over 40% in the last one year, while silver is up almost 34%.
Currently, how do the prices stack up in gold and silver? Silver is currently around $33 an ounce while Silver spot price in India is around Rs 1 lakh per Kg. The gold rate today is around US$ 3,030 an ounce. In India meanwhile, the price is Rs 88,500 per 10 grams.
Given these stupendous returns, the questions that are continuously asked are these –
What is behind the rise in prices of these two precious metals – gold and silver? And will the shine continue?
First, let’s see why silver has been on the rise.
Bullishness in Silver
For the fifth consecutive year, demand for silver exceeds supply. Global silver demand is expected to remain broadly stable in 2025 at 1.20 billion ounces, while the total global silver supply is forecast to grow by 3 percent in 2025 to an 11-year high of 1.05 billion ounces. So, there’s a gap as demand is exceeding supply. This mismatch is good news for silver prices.
But, where’s the demand coming from?
Two big factors are being cited for silver prices shooting up.
Firstly, increased industrial activity.
And secondly, rising interest in silver as an investment option.
The silver market is relatively small with a turnover of around $30 billion annually. And that’s why a minor shift in supply has a big impact on the demand and the price.
The increasing demand for silver from green technologies in the industrial sector, coupled with limited supply growth, makes silver a favourable option in the rapidly evolving economic landscape.
Will the price of silver increase in 2025 and beyond? Here’s a simple thumb rule or a ‘silvery hack’ to know this – Keep an eye on the gold-silver ratio.
Source: Google Finance
What is the Gold-Silver Ratio?
The gold-silver ratio is an expression of the price relationship between gold and silver and indicates the number of ounces of silver it takes to equal the value of one ounce of gold.
The gold-silver ratio, a metric comparing gold to silver prices, has increased significantly since the late 1980s when the average used to be 70:1.
Today, the ratio is close to 91:1 as the gold is around $3,030 and Silver trades around $33.
What it means is that silver is still undervalued and has some space to cover. Either the silver price moves fast or the gold price dips or stays constant to bring the ratio closer to its long-term average of 70:1.
Source: Sprott Asset Management LP, Bloomberg. Data as of 12/31/2024.
Bullishness In Gold
Gold has traditionally been expected to beat inflation and remain a safe-haven investment. Of late, central banks have become big buyers of gold buying unprecedented levels of over 1,000 tonnes each year. Also, Trump’s tariff policies are creating economic uncertainties across geographies. Already, talk of a US recession is doing the rounds.
So, what’s next? Uncertainty and faltering economic growth may prompt the US Fed to swiftly cut rates, weakening the dollar and increasing gold prices.
Key Takeaway
Both gold and silver can be a part of one’s long-term portfolio over 5, 10 and 15 years. The gold-silver ratio can be used to make a calculative decision on whether to invest more in gold or silver at any point in time.
As seen in the past, the returns may not be linear but when they move, the returns can set off any fall in the portfolio.
In other words, having exposure to gold and silver may provide a silver lining to your portfolio in the long term.
Also Read: Gold vs. Sensex: A 20-year analysis reveals crucial lessons for asset allocation
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