Once overlooked, now unignorable: Why Silver may offer tactical gains amid Gold’s glory
In the glittering world of precious metals, gold has been stealing the spotlight. But as savvy investors know, sometimes the best opportunities lie in the shadows. While gold has soared to unprecedented heights, reaching $3,500 in April 2025, silver has remained subdued, struggling to breach even the $35 mark. This striking divergence warrants closer examination.
The disparity becomes even more intriguing when we look back to August 2011, when gold traded near $1,900 and silver commanded $45 per troy ounce.
Fast forward to today, and gold has nearly doubled, while silver has actually retreated. This peculiar dynamic has pushed the gold-to-silver ratio to approximately 100:1 – approaching historical extremes and significantly above its 25-year mean of 68:1.
The structural case for Silver
What makes the current silver market particularly compelling is the persistent supply-demand imbalance. If projections hold true, 2025 will mark the fifth consecutive year of silver deficit. The market is exceptionally tight, with industrial demand steadily climbing while supply from mining and recycling has remained relatively flat.This deficit isn’t a temporary aberration – it’s become structural. Despite clear market signals, supply has been slow to respond, creating a bottleneck that appears increasingly unsustainable. The numbers tell a clear story: since 2021, silver has experienced deficits ranging from 79 million ounces to an estimated 250 million ounces for 2025.
Silver’s historic performance pattern
One of the most compelling arguments for silver comes from examining previous precious metal bull markets. Historically, silver leads these rallies with spectacular outperformance.
Why does silver typically outperform? The answer lies partly in market size. The silver market is substantially smaller than gold, meaning equivalent capital flows produce more dramatic price movements.
Additionally, silver’s dual role as both a precious metal and an industrial commodity creates unique supply-demand dynamics that can amplify upside potential during favourable market conditions.
Industrial demand as a catalyst
Gold is prized mostly for preserving wealth and protecting against inflation, whereas silver stands out for its indispensable role in various industrial applications.
The green energy transition has been particularly significant for silver demand, with solar panels requiring substantial amounts of the metal. Electric vehicles, electronics, and medical applications further bolster consumption.
This industrial component provides an additional catalyst beyond monetary demand. As technological adoption accelerates globally, particularly in emerging economies, the industrial demand floor for silver continues to rise – creating a firm foundation for price appreciation.
A tactical opportunity, not a core holding
Despite silver’s promising setup, investors should approach with tactical discipline rather than viewing it as a long-term core holding. Silver is notoriously volatile.
The optimal approach is a disciplined allocation of no more than 5% of one’s portfolio, with clearly defined exit parameters. Whether targeting a 30-50% return or implementing a 10-15% stop-loss, the key is adherence to predetermined thresholds. The objective is capturing the anticipated catch-up rally, not establishing a permanent position.
For most investors, silver ETFs represent the most efficient exposure vehicle. They offer the convenience of exchange trading without the complications of physical storage, while providing sufficient liquidity for tactical positioning.
Fair value and price targets
What might constitute a reasonable price target for silver? Current fair value estimates suggest a range of $53-$75 – representing potential upside of 50-115% from current levels. This isn’t mere speculation but derived from historical relationships with gold and analysis of fundamental supply-demand dynamics.
If the gold-silver ratio were to revert merely to its long-term average of approximately 60:1, and gold prices remained steady, silver would trade at around Rs 165/gm from the current level of approximately Rs 97/gm – a 70% increase.
The current setup for silver presents a compelling risk-reward profile for investors willing to make a tactical allocation with disciplined parameters.
While precious metals investing is never without risk, silver’s persistent underperformance relative to gold, coupled with tightening physical markets, suggests the white metal may finally be preparing to catch some long-awaited gold dust.
(The author is CIO and Founder, Valtrust)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)