Investors are increasingly turning their attention to other precious metals. Gold, in some respects, has become prohibitively expensive, particularly within the jewellery sector. Consequently, we’ve recently observed significant surges in the prices of silver and platinum, metals that have historically been treated primarily as industrial commodities.
Silver is attempting to catch up with gold, having yielded a return of approximately 24% over the past 12 months, while gold delivered a 44% return during the same period. Among commodities this year (changes since the beginning of the year), there’s been a shift in the leadership table. Platinum has already gained around 36%, while gold is up 25%. Silver continues to lag somewhat, with a return of approximately 24%.
Commodity Futures Returns (Generic contracts, no prior rolling). Source: Bloomberg Finance LP
The crucial gold-to-silver ratio has experienced a notable decline following the recent surge in silver prices. Just a few days ago, the ratio stood at over 100, but it is currently retreating to around 90 points. Long-term averages for this price ratio typically fluctuate at significantly lower levels, ranging from 60-80. This suggests that if the bull market in precious metals continues, silver still has considerable room for potential upside.
Gold-to-Silver Ratio. Source: Bloomberg Finance LP
The rise in prices to their highest levels since 2012 has reawakened investors who, in recent years, had overlooked strong bullish fundamentals. Data from the Silver Institute indicates that 2025 could mark the seventh consecutive year of a significant deficit (including demand from ETF funds). 2024 saw another robust increase in industrial demand, primarily in photovoltaics, a trend most likely to continue this year. Demand from the jewellery sector and ETFs is also expected to rise, which, coupled with limited supply, could lead to a further increase in the deficit to historically unprecedented levels. A challenge for silver in the context of physical metal investment remains the VAT tax, which applies in most European countries.
Silver ETFs have resumed purchasing the metal, although holdings are still far from the record levels seen around 2020 and 2021. Source: Bloomberg Finance LP
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