Gold-silver ratio: Silver did outperform gold in the last year, but when times get tough, the yellow metal emerges as the ultimate winner. The recent conflict in the Middle East underscores this trend.
At the time US and Israel are attacking Iran, and the Islamic state is responding with full force, gold prices are retaining their sheen even as silver sulks. Both precious metals are considered safe haven bets, but given silver’s higher beta and its usage in industries, it is a less preferred choice for investors.
To better understand the tug-of-war between gold and silver, traders have consistently watched a simple gauge — the gold-silver ratio.
Currently, with the US spot gold prices at $5,166.11 an ounce and silver prices at $84.35 an ounce, the gold-silver ratio is approaching the 62 mark.
What is the gold-silver ratio?
The gold-silver ratio indicates how many ounces of silver are needed to buy one ounce of gold. It is a widely used metric in the precious metals market to assess the relative value and performance of gold compared with silver.
Historically, the 10-year ratio averages close to 80:1. When it drops below 50:1, silver is no longer cheap, suggests an analysis by WhiteOak Capital.
What does the current gold-silver ratio indicate?
The current gold-silver ratio has rebounded sharply from sub-45 levels at the beginning of the year, when the silver prices were consistently outperforming the yellow metal. The rebound was led by a sharper drawdown in the white metal vis-à-vis gold during the commodity market correction.
Since then, gold’s outperformance has pushed the ratio consistently higher.
It looks like this could be a newer range, where 55 to 60 could be a lower base, and on the higher side, 75 to 80 or at best 85 could be a higher range, said Manav Modi, Commodity Analyst at Motilal Oswal Financial Services.
The ratio’s behaviour, combined with rising geopolitical tensions in the Middle East, is reshaping the relative outlook for gold and silver. “Now, with the ratio stabilising near 62 and showing signs of moving higher again, the market appears to be re-pricing risk,” said Nirpendra Yadav, Sr. Commodity Research Analyst at Bonanza.
A rising ratio generally indicates: Gold outperforming silver because of returning defensive positioning, while growth expectations softening, he said.
Historically, the ratio tends to move in cycles. During periods of heightened geopolitical uncertainty and macro stress, gold typically leads the rally because it is viewed as the primary safe-haven asset by global investors and central banks.
However, once precious metals enter a broader bull phase, silver often begins to catch up and eventually outperform gold due to its higher beta and dual demand profile, according to Harshal Dasani, Business Head of INVasset PMS.
“If macro conditions remain supportive for precious metals — such as expectations of easing global monetary policy, declining real yields, and sustained geopolitical uncertainty—silver could gradually narrow the performance gap. In that context, the current ratio may actually signal the potential for silver to accelerate rather than continued gold dominance,” Dasani added.
How to allocate to gold and silver now?
The Middle East conflict is not showing any signs of slowing down. So far, over 1,000 people have been killed in Iran, while many countries are facing disruptions to crude oil and other energy resources.
If tensions escalate further, gold is likely to continue outperforming.
Against this backdrop, Modi recommends that 70-75% of the 10-15% precious metals allocation should be in gold, and about 30-25% could be in silver.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
