This indicator says silver is undervalued. Why silver hasn't caught up to gold - yet!
Gold-silver ratio remains historically high, suggesting silver is undervalued
Gold's record run has left silver behind, and although the white metal hasn't played catch-up as quickly as many investors had expected, the price ratio between the two metals has held firm near historical highs, and silver faces a global deficit for fifth straight year. That suggests silver is still undervalued.
Gold and silver are correlated, but "gold is the better hedge and diversifier, especially in times when growth risks are ramping [up]," said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Renewed fears around economic and financial stability provided a boost to gold as a haven asset last week, but those same worries dulled the outlook for silver as an industrial metal.
Gold based on the most-active futures contract (GC00) posted a climb of 5.6% last week, while silver futures (SI00) tacked on a more modest 3.9%, according to Dow Jones Market Data.
There are times when silver can be more volatile than gold, Grant said, pointing to early April as an example. Silver prices plunged more than 15% from April 2 to April 4, following President Donald Trump's "liberation day" tariff announcement. Gold, meanwhile, fell roughly 4% during that same period.
"Demand destruction on the industrial side can overwhelm heightened investor interest, and silver underperforms," Grant said.
Gold futures (GC00) climbed as high as $3,509.90 an ounce on April 22 to mark the highest price on record but have declined by just over 4% since then in what looks to be a "cool-off from an overheated rally," said Peter Spina, founder and president of investor websites GoldSeek.com and SilverSeek.com.
A pullback in gold can hit silver prices in a "more amplified manner," but Spina said he continues to see an opportunity to "snap up some silver at a better price" - and quickly, as the price tends to return higher, too.
That's especially true given that silver is suffering from a global structural market deficit, he said. Global silver demand was expected to top silver supply for a fifth year in a row in 2025, according to the Silver Institute.
Gold-silver ratio
While gold and silver prices have been volatile in recent weeks, the price ratio between the two - the number of ounces of silver needed to buy one ounce of gold - has held relatively steady recently at a key level at or near 100.
That ratio averaged 84.8 from 2023 to 2024, David Wilson, director of commodities strategy at BNP Paribas, wrote in a May 14 note. BNP Paribas forecasts that ratio to remain largely in a higher range of 100 to 110 as "global macro uncertainty stemming from U.S. tariffs hampers silver upside, but supports gold" through the second half of the year.
Still, Wilson said there is upside risk to price expectations for silver if investor appetite for risk assets returns on significantly reduced trade tensions, which could lead silver to outperform gold. BNP Paribas forecasts an average 2025 price of $33.20 an ounce for Comex silver.
The key downside risk for prices, meanwhile, would be a failure of the main parties in the trade war to conclude "meaningful" trade deals once current tariff pauses have lapsed, Wilson said.
For now, at around 100 and higher, the gold-silver ratio is "flashing to the market that there is a sale on silver," said GoldSeek.com's Spina.
However, that ratio is down from its peak this year.
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Great analysis! The persistent high gold-silver ratio definitely points to silver being undervalued right now, especially with the global supply deficit continuing for a fifth year.