Gold to Silver Ratio at 100. Which Precious Yellow Metal Is Worth Considering Now?

If we consider gold-to-silver ratio, which is calculated by dividing gold price by silver, it has crossed a little over 100 (as of April 30, 2024)

The graph above shows that a remarkably high gold-to-silver ratio was also the case during the COVID-19 pandemic. While this ratio plunged for a brief while thereafter, it once again has been on an upward trend and more pronounced since last year. At present this ratio, a little over 100:1, is noticeably higher than the decade-long average.

What this ratio denotes is that silver is currently undervalued compared to gold. The precious yellow metal in recent years has witnessed a fast run-up or up-move. Going by the present ratio, you would be able to purchase 100 ounces of silver to one ounce of gold. In other words, a higher gold-to-silver ratio seemingly indicates that silver is reasonable or cheap (as the case may be) from an investment standpoint compared to gold, and vice versa.

That being said, since the lows of the COVID-19 pandemic, both gold and silver have delivered handsome absolute returns of +137% (i.e. +18% CAGR) and 178% (i.e. +22% CAGR) in Indian rupee terms (as of April 30, 2025).

One can say that even the undervaluing of silver back then during the pandemic has rewarded investors who chose to invest in the precious white metal better.

[Read: Top 5 Silver Mutual Funds in India]

Is There an Upside Potential for Silver Even Now?

Well, apart from being a precious metal that holds cultural significance in India and is symbolic of wealth and prosperity, a fact is also that it is an industrial commodity.

Silver is used in electronic goods, solar panels, switches, electric vehicles, medical instruments, satellites, 5G technology, Internet of Things (IoTs), plus many other technical facets.

Hence, the fortune of silver as an asset class is closely linked to the outlook for the industrial world and the overall economy.

In other words, silver is a pro-cyclical commodity. If macroeconomic conditions are conducive and industrial growth is encouraging, usually, it usually bodes well for the silver.

However, due to the pro-cyclicality silver may be more volatile than gold. Simply put, the returns could be lumpier with sharp up and downward movement.

Given the Trump 2.0 administration's protectionist policies, particularly the tariff tantrums, silver is expected to remain volatile. One needs to see what happens after the 90-day hold period on reciprocal tariffs ends on July 9, 2025.

If steep reciprocal tariffs stay, in a potential trade war the US could slip into a recession and ripple effects of it may be seen on the economies, including the emerging market economies. When Trump earlier, in the first week of April, announced steep reciprocal tariffs on several countries, it did weigh down on silver; took some of its sheen.

If uncertainty looms over the economic growth due to Trump 2.0 protectionist policies, silver may lag or underperform.

What About Gold - Will It Exhibit Sheen?

Gold, on the other hand, is counter-cyclical. Meaning, it performs better in times of macroeconomic and geopolitical uncertainty, plus has proved to be a hedge against inflation over the long term.

At present, factors such as looming geopolitical tensions and risks, Trump's tariff tantrums, trade policy uncertainty, potential trade wars, geoeconomic fragmentation, risk of imported inflation, and high global public debt (which the IMF expects will keep rising), recent weakening in the US dollar, and heightened volatility in the financial markets, are keeping the spotlight on gold.

Simply put, smart investors are taking refuge in gold (by investing in gold ETFs and gold saving funds) for its trait of being a safe haven and a store of value in times of uncertainties and risks.

Even central banks recognising the risks in play for the global economy, as a part of their foreign exchange reserve management, are actively buying gold. Much of the buying has increased in view of Trump 2.0 protectionist policies.

As of FY25, the Reserve Bank of India (RBI) held 880 tonnes of gold. Year after year the RBI has continually increased its gold reserve since the COVID-19 pandemic. Today, India is at the 7th spot with countries holding the highest gold reserves.

The weakening of the dollar (which is a reserve currency) and potential risk to global economic growth have encouraged the RBI (and many other central banks) to buy gold, considering it to be a secure asset.

That being said, past data shows that even a stronger dollar hasn't been able to curb the long-term uptrend of gold. This is because, unlike financial assets, gold is a real asset - meaning gold does not carry credit or counterparty risk.

Going forward, to support economic growth, if major central banks resort to policy interest rate cuts in 2025 and address liquidity concerns, it shall further augur well for gold.

What Should Investors Do?

You see, although the gold-to-silver is slightly above 100 and the decade-long average, it is still well below the all-time high of 126.5 seen in March 2020 during the pandemic. So, given that, the current ratio of a little over 100:1, cannot be considered very cheap. The margin of safety isn't very comfortable yet and there are headwinds in play for industrial outlook and global economic growth, which may not work well for silver.

The Silver Institute's latest World Silver Survey also points out the following:

"Silver's "failure to launch" is mainly due to the macro and geopolitical drivers of the past couple of years being primarily supportive of gold's more widely accepted quasi-monetary properties.

Related to this, some of the key market participants of the past two years, for example, macro/generalist funds and sovereigns, are comfortable with the gold's market depth and tradition as a diversifier, but less so with silver's smaller size and industrial attributes. Its strong supply-demand conditions also have had as yet a limited impact on its price, due to still plentiful above-ground stocks of silver."

The latest World Silver Survey also explains many silver bulls remain disappointed with silver's price performance. This mostly reflects how it has fluctuated relative to gold.

At present, the fact is, that the fundamentals for gold look more solid considering the macroeconomic and geopolitical environment.

Even the World Gold Council (WGC) has expressed that given gold's strategic significance and the economic uncertainties that continue to look ahead, investors should carefully consider the portfolio benefits gold can offer in 2025 and beyond.

So far in CY2025 gold has gained +25%, while silver has clocked +13% (absolute returns) as of April 30, 2025.

However, keep in mind that past instances of superior performance may not necessarily be sustained in the future. Like any other investment, gold price too can witness volatility, short-term corrections, as well as phases of stagnant growth.

Nevertheless, gold shall prove to be an effective gold as a portfolio diversifier and hedge. You may allocate around 10-15% of your entire portfolio to gold with a long-term view (of over 5 to 10 years).

In the gold rally if the allocation has exceeded this limit, book some profit and trim it down.

Invest strategically and sensibly. Be thoughtful in your approach.

Happy Investing!

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.