Despite the challenges faced by stock markets in achieving gains, gold has emerged as a standout asset, yielding significant returns. Consequently, gold has become a focal point of attention.
Amidst this enthusiasm, silver, which is closely related to gold, has not received as much media coverage. However, it is important to note that silver is also making strides in the competition to be recognized as one of the top-performing asset classes in 2025. Over the past year, gold has appreciated by more than 40%, while silver has seen an increase of nearly 34%.
At present, how do the prices of gold and silver compare? Silver is trading at approximately $33 per ounce, while the spot price of silver in India is around Rs 1 lakh per kilogram. Meanwhile, the current price of gold is about US$ 3,030 per ounce, and in India, it stands at Rs 88,500 per 10 grams.
Given these remarkable returns, several questions arise:
What factors are driving the price increases of these two precious metals—gold and silver? Will this upward trend persist?
To begin, let us explore the reasons behind silver’s recent price surge.
Positive Outlook for Silver
For the fifth consecutive year, the demand for silver has outstripped its supply. Global demand for silver is projected to remain relatively stable in 2025 at 1.20 billion ounces, while the total global supply is anticipated to rise by 3 percent, reaching an 11-year high of 1.05 billion ounces. This discrepancy between demand and supply bodes well for silver prices.
But what is fueling this demand?
Two primary factors are contributing to the rise in silver prices.
Firstly, there has been an uptick in industrial activity.
Secondly, there is a growing interest in silver as an investment vehicle.
The silver market is relatively modest, with an annual turnover of around $30 billion. This means that even a slight change in supply can significantly affect demand and pricing.
The increasing demand for silver driven by green technologies in the industrial sector, combined with limited supply growth, positions silver as an attractive option in the rapidly changing economic environment.
Will the price of silver rise in 2025 and beyond? A useful guideline to consider is to monitor the gold-silver ratio.
What is the Gold-Silver Ratio?
The gold-silver ratio represents the price relationship between gold and silver, indicating how many ounces of silver are needed to match the value of one ounce of gold.
Since the late 1980s, the gold-silver ratio has seen a notable increase, with the average then being 70:1. Currently, the ratio stands at approximately 91:1, with gold priced around $3,030 and silver trading at about $33.
This suggests that silver remains undervalued and has potential for growth. For the ratio to approach its historical average of 70:1, either silver prices must rise significantly, or gold prices must decrease or stabilize.
Bullish Outlook for Gold
Gold has long been viewed as a hedge against inflation and a secure investment. Recently, central banks have significantly increased their gold purchases, acquiring over 1,000 tonnes annually. Additionally, economic uncertainties stemming from Trump’s tariff policies are affecting various regions, and discussions of a potential US recession are becoming more prevalent.
What lies ahead? Economic uncertainty and sluggish growth may lead the US Federal Reserve to lower interest rates, which could weaken the dollar and drive up gold prices.
Key Takeaway
Both gold and silver can be valuable components of a long-term investment portfolio over periods of 5, 10, or 15 years. The gold-silver ratio can assist in making informed decisions about whether to allocate more resources to gold or silver at any given time.
Historically, while returns may not follow a straight path, significant movements can offset declines in a portfolio. In essence, diversifying with gold and silver may offer a beneficial advantage to your portfolio in the long run.
