Gold-Silver Ratio: The gold-silver ratio has witnessed sharp swings so far this year amid heightened volatility in precious metal prices, with the ratio slipping below the key 55 mark on Thursday, 14 May, which reflects silver’s recent outperformance against gold.
The decline in the ratio comes after the government raised effective import duties on both metals to 15% from 6%, targeting a widening import bill and geopolitical pressure stemming from the West Asia crisis.
“World Gold Council data indicates that each 1% duty increase reduces consumer gold demand by roughly 6.4 tonnes — meaning the cumulative 9-percentage-point increase could suppress annual demand by approximately 57 tonnes. The steeper duty structure also risks reigniting gold smuggling activity, which had declined meaningfully following the 2024 duty cut,” informed Renisha Chainani, Head – Research at Augmont.
Gold and Silver prices in India declined today on profit booking after the precious metals jumped over 6% each in the previous session on the import duty hike on precious metals. Silver prices on MCX fell 1.9% to ₹2,94,450 per kg, while gold prices fell 0.7% to ₹1,61,027 per 10 grams.
Gold-Silver ratio history
Gold-Silver ratio rose to over 62 in April as silver prices staged a sharp rally in the previous month, while gold continued to trade near record highs, prompting investors to reassess which precious metal currently offers better investment potential.
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A gold-silver ratio below 55 indicates that silver has recently outperformed gold. Historically, levels closer to 50 suggest stronger silver outperformance compared to gold.
The increased import duties on gold and silver make them costlier to bring into the country, leading to higher domestic prices. This move aims to curb non-essential imports and conserve foreign exchange reserves.
The hike in import duties could lead to higher retail jewelry prices, potentially impacting discretionary purchases and causing a shift towards lighter-weight or exchange-driven purchases. There are also concerns about increased smuggling and potential job losses in the sector.
While gold has a positive medium-to-long-term outlook driven by structural factors and geopolitical risks, its prices may consolidate in the near term. Silver’s long-term trend depends on industrial demand recovery, and a staggered investment approach is advised due to its volatile nature.
Gold ETFs are seen as beneficiaries of the duty hike, as they offer a cost-effective way to invest in gold without making charges or storage costs. The duty increase sharpens the cost differential against physical gold, making ETFs more compelling for investment-led buyers.
Earlier this year, the ratio had dropped below 44 in late January as silver prices rallied strongly. However, a subsequent correction in silver pushed the ratio above 70 during February. In March, the ratio largely remained above 60 before hovering around 62 in April as bullion prices climbed higher. Wednesday’s drop below 55 again reflected silver’s recent outperformance against gold.
According to Tata Mutual Fund, the ratio had shown a strong recovery last month by moving above 62, signalling gold’s outperformance over silver.
“Gold-Silver ratio has witnessed good recovery last month. Ratio moved above 62 suggesting outperformance of gold over silver. The expectation is that the ratio to rise back towards 68 level, mostly due to rise in gold demand amid geopolitical tension,” predicted the fund house.
Tata Mutual Fund noted that April witnessed comparatively lower market volatility as investor confidence returned with a stronger orientation towards equities. This reduced opportunities for gold and silver investments and weighed on performance. However, strong ETF inflows, a moderately weaker US dollar and dip buying following March’s sharp correction helped support precious metal prices.
The fund house also highlighted that industrial demand from the solar energy and electric vehicle sectors continued to provide strong support for silver prices globally. At the same time, gold ETFs witnessed robust inflows led by Europe due to concerns over geopolitical risks, particularly surrounding potential disruptions linked to the Strait of Hormuz.
What is Gold-Silver Ratio?
The gold-silver ratio measures how many ounces of silver are required to purchase one ounce of gold. A rising ratio indicates that gold is outperforming silver, while a falling ratio suggests silver is gaining strength relative to gold. Historically, a ratio above 80 is viewed as silver being relatively undervalued, while levels closer to 50 indicate stronger silver outperformance.
Gold vs Silver: Which precious metal should you buy?
Tata Mutual Fund maintained a bullish long-term outlook on gold despite expecting some near-term consolidation in prices.
“We expect gold prices to consolidate in the near term, amid mixed macro signals — ‘higher for longer’ US rates, a stronger dollar, and elevated bond yields. Short-term volatility of around ±5% is likely,” Tata Mutual Fund said.
The fund house said geopolitical developments, especially related to the US-Iran conflict, could continue driving volatility in bullion markets through ceasefire-related headlines. It added that rupee depreciation may cushion downside risks for Indian investors and help domestic gold prices remain relatively resilient compared to international markets.
Tata Mutual Fund further stated that the medium-to-long-term outlook for gold remained positive due to favourable structural and cyclical factors. The fund house advised investors to treat meaningful corrections in gold as accumulation opportunities while continuing to view the metal as a strategic long-term portfolio allocation.
The fund house also pointed to potential policy friction between the US administration and the Federal Reserve as a factor that could weaken the US dollar and provide an incremental tailwind to gold prices in the near term.
On silver, Tata Mutual Fund said prices could fluctuate alongside industrial metals amid concerns over global demand and slowing economic growth.
“Silver is a developing growth story, and the long-term trend is highly dependent on broad recovery in industrial demand. One can look for staggered approach to invest in the medium term to long term investment considering the volatile nature of the commodity,” Tata Mutual Fund said.
The fund house added that supportive demand from China could help silver prices in the short term. However, deterioration in the global economic outlook, slower solar installations and liquidation of long positions had eased supply tightness in the silver market and could limit medium-term upside
Disclaimer: 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.
