Silver’s breakout year: Why poor man’s gold is outshining its richer cousin

Long dismissed as gold’s cheaper cousin, silver is now taking center stage in global metals markets. Prices have surged to fresh record highs, fuelled by a potent mix of bullish fundamentals, rising industrial demand, and growing strategic interest from institutions and even central banks. A sharp correction in the gold-silver ratio has further bolstered silver’s appeal, prompting analysts to suggest this rally may be just getting started.

Silver futures for July expiry hit a new all-time high of Rs 1,09,748 per kilogram on MCX on Wednesday, breaking Tuesday’s record. The rally extended further in September contracts, which touched Rs 1,11,000 per kilogram. This marks a nearly 25% rise from silver’s all-time low of Rs 88,050 per kg, underscoring the metal’s spectacular reversal in fortunes.

Globally, silver prices were steady around $36.72 per ounce on Thursday, holding close to the 13-year high of $37.40 per ounce reached earlier in the week. Though domestic prices cooled slightly on June 19 to Rs 1,08,300/kg, analysts attribute the dip to minor profit-booking by traders, not a weakening of trend.

In sharp contrast, gold prices have softened over the last two sessions. Gold futures for August delivery slipped to Rs 99,329 per 10 grams on Wednesday, down 0.2%, even after breaching Rs 1 lakh per 10 grams for the first time earlier this month. The divergence has narrowed the gold-silver ratio, once above 100 in April and May, to about 91 now, further strengthening silver’s case.

What’s driving the silver surge?

At the heart of silver’s breakout rally is a potent combination of rising industrial demand, structural supply deficits, and a macroeconomic backdrop that’s favouring safe-haven assets.
“COMEX silver surged to a 13-year high of $37.40 per ounce, while MCX silver prices rallied to a record high of Rs 109,748/kg on Wednesday, driven by strong safe-haven demand amid escalating geopolitical tensions,” said Kaynat Chainwala, AVP-Commodity Research at Kotak Securities.
Chainwala noted that silver’s dual identity, as both an industrial commodity and a precious metal, makes it uniquely positioned. “This allows it to benefit from heightened risk aversion as well as from long-term trends in renewable energy and technological advancement,” she said.
According to Chainwala, silver’s critical applications in solar energy, electronics, EVs, and 5G technology have driven demand to record levels. In 2024, industrial demand hit a new peak of 680.5 million ounces, while global mine supply has struggled to keep pace after peaking in 2016. Despite a modest 2% supply uptick and a projected 1% dip in total demand in 2025, the market is bracing for a steep deficit of 117.6 million ounces.

The gold-silver ratio: Catalyst for a catch-up rally

The sharp correction in the gold-silver ratio has also triggered aggressive positioning in silver. Historically, a high ratio indicates that silver is undervalued relative to gold, and reversion often leads to silver outperforming.

“The gold-silver ratio has rarely been this high historically and we are now seeing it start to correct. I believe it has a long way to go,” said Brad Smoling, Managing Director at Smoling Stockbroking. With gold currently at $3,411 an ounce and silver at $36, the ratio stands around 93. To return to the long-term average of 70, silver would need to climb to $48 per ounce, assuming gold prices remain unchanged.

Smoling also pointed to long-standing structural issues in the silver market. “The silver price has been suppressed by a concentrated short position held by a handful of bullion banks on the Comex exchange. This has been the case for decades,” he said.

“But we are now at the point where the physical shortfall in silver supply for the past five years is no longer controlled by the futures market. It is such a small market,” Smoling said.

Millennials, institutions, and a changing investment narrative

Silver’s affordability compared to gold, especially at a time when gold trades above Rs 99,000 per 10 grams, is making it increasingly attractive to newer generations of investors. Analysts say millennials and Gen Z are driving a shift toward silver as both a tactical bet and a long-term play.

“Silver remains more affordable than gold, while also offering broader exposure to the booming green and tech-driven industrial sectors,” Chainwala said. Institutional interest is rising too, with ETF holdings up 2.2 million ounces in a single day last week.

In a landmark development, Russia’s plans to purchase $535 million worth of silver over the next three years marks the first known central bank entry into the silver market in recent history, signalling the metal’s growing strategic importance.

“The biggest long-term issue now being realised is that so much silver has been consumed or destroyed, unlike gold, we will be struggling to meet global demands from this point on,” Smoling added.

Cautious optimism: Profit-booking or just a pause?

While silver eased slightly on Thursday, analysts say this is a natural breather. “Taking partial profits at elevated levels is advisable to lock in gains while maintaining exposure to further upside,” said Chainwala. “Long-term investors should view pullbacks as buying opportunities.”

Chainwala forecasts silver could climb toward $40 per ounce this year, with a possible extension to $50 by the end of 2026. On the domestic front, MCX silver could test Rs 1,25,000 per kilogram, with support levels around Rs 1,01,300/kg over the next six months.

Smoling, meanwhile, urged investors to be selective in their exposure. “I advise my clients to consider some physical metal and good quality silver mining shares. I would avoid a lot of the ETFs and other paper silver investments.”

With geopolitical tensions brewing, particularly in the Middle East, and the U.S. Federal Reserve maintaining a cautious stance on inflation and interest rates, silver is enjoying a rare alignment of factors that support both short-term rallies and long-term revaluation.

Once a sidelined asset, silver is now being re-rated, not just as an industrial input or inflation hedge, but as a strategic investment that combines affordability, scarcity, and essential utility. And with both investors and institutions waking up to its promise, the silver story may just be entering its most consequential chapter yet.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)