Author
Anthony Roberts has been working in the precious metals industry for five years, bringing a deep passion for metals and market trends. Highly tech-savvy, he leverages his expertise to stay ahead in the industry and actively trades in his spare time. His analytical mindset and enthusiasm for both technology and investing make him a dynamic professional in the field.
.avif)
.jpg)
Topic
Silver, often dubbed the “poor man’s gold,” is flashing a compelling signal of undervaluation in today’s red-hot precious metals market. With gold soaring to $3,289 per ounce and silver languishing at $32.98 per ounce, a recent MarketWatch article points to the gold-silver ratio as a critical indicator that silver is deeply underpriced.
Currently hovering near 99.7:1, this ratio suggests silver is on the cusp of a potential breakout that could rival its historic rallies. In this comprehensive analysis, we’ll dive deep into the gold-silver ratio’s mechanics and historical significance, explore why silver hasn’t kept pace with gold, uncover the macroeconomic and industrial forces driving its undervaluation, and outline why 2025 could mark a turning point for the white metal. Buckle up—this is silver’s moment to shine.
.jpg)
The gold-silver ratio, calculated by dividing the price of gold by the price of silver, is a cornerstone metric for precious metals investors. It reveals how many ounces of silver are needed to buy one ounce of gold, offering insight into their relative valuation. As of May 28, 2025, with gold at $3,289 and silver at $32.98, the ratio stands at 99.7:1 ($3,289 ÷ $32.98). This is a stark departure from the historical average of 60:1 over the past few decades, signaling that silver is significantly undervalued, according to analysis in MarketWatch.
To grasp the ratio’s implications, consider its historical context:
Geological Roots: Silver is approximately 17 times more abundant than gold in the Earth’s crust, and ancient economies often set the ratio at 15:1, reflecting this natural ratio. For centuries, this underpinned bimetallic monetary systems.
Modern Trends: Since the 1970s, when the U.S. abandoned the gold standard, the ratio has averaged around 60:1, balancing silver’s dual role as a monetary and industrial metal against gold’s safe-haven status.
Bull Market Dynamics: During precious metals bull markets, silver tends to outperform gold, compressing the ratio. In 1980, during the Hunt brothers’ silver squeeze, the ratio plummeted to 15:1 as silver hit $50 per ounce. In 2011, it fell to 30:1 when silver neared $49.
Bear Market Extremes: In periods of low demand, the ratio spikes. In 1991, it reached 100:1, marking silver’s deepest undervaluation. The 2020 COVID panic pushed it to 125:1, a modern record, before it eased.
Today’s 99.7:1 ratio is among the highest in decades, approaching levels that have historically preceded explosive silver rallies. To quantify the opportunity: if the ratio reverted to its 60:1 average, silver would climb to $54.82 per ounce ($3,289 ÷ 60), a 66% gain from $32.98. In a more aggressive scenario, a drop to 40:1—common in bull markets—would propel silver to $82.23 per ounce, a 149% surge. A return to the 30:1 seen in 2011 would imply $109.63 per ounce, a 232% jump. These projections, grounded in historical precedent, underscore silver’s asymmetric upside potential.
The ratio’s predictive power lies in its mean-reverting nature. High ratios signal undervaluation, drawing investor attention and capital, which compresses the ratio as silver’s price rises faster than gold’s. The current 99.7:1 level, as True Gold Republic emphasizes, is a clarion call for silver’s impending catch-up.
Gold has been on a tear in 2025, surging to $3,289 per ounce, fueled by a confluence of macroeconomic and geopolitical drivers. Silver, at $32.98, has lagged despite its undervaluation. The MarketWatch article outlines several reasons for this divergence:
- Gold’s Safe-Haven DominanceGold is the ultimate safe-haven asset, thriving amid inflation fears, geopolitical tensions (e.g., ongoing U.S.-China trade disputes and Middle East unrest), and currency devaluation concerns. In 2024, central banks added over 1,000 tons to gold reserves, per the World Gold Council, driving prices higher. Institutional investors and gold ETFs, such as the SPDR Gold Shares (GLD), have seen steady inflows. Silver, while also a monetary metal, derives over 50% of its demand from industrial applications—solar panels, electronics, 5G infrastructure, and medical devices. In 2024, industrial silver demand hit an all-time high, but high interest rates and global economic uncertainty have muted its price response.
- Silver’s Smaller, More Volatile Market The silver market is a fraction of gold’s size—roughly $150 billion in above-ground value versus $1.2 trillion for gold. This smaller scale amplifies volatility and makes silver heavily dependent on speculative retail interest. Gold enjoys consistent institutional buying, but silver’s price often hinges on retail enthusiasm, which has been subdued since the 2021 “Silver Squeeze” fizzled. Without a speculative catalyst, silver struggles to match gold’s momentum.
- Supply Deficits Yet to Be Priced In Silver has been in a global supply deficit for three consecutive years, with 2024 demand reaching 1.2 billion ounces against mine production of 800 million ounces, per the Silver Institute. Declining output from major producers like Mexico and Peru, coupled with limited recycling, has widened this gap. However, the market has been slow to reflect these tightening fundamentals, keeping silver’s price suppressed. The MarketWatch piece suggests this delay is temporary, as supply constraints eventually force prices higher.
- Investor Misconceptions and Sentiment Many investors pigeonhole silver as an industrial metal, overlooking its monetary heritage. This misperception, highlighted by True Gold Republic, diverts capital to gold, which is seen as a purer safe-haven play. Additionally, silver’s lack of mainstream media coverage compared to gold dampens retail interest. However, as awareness of the 99.7:1 ratio spreads, investor sentiment could shift rapidly.
- Macroeconomic Headwinds High interest rates in 2024, maintained by the Federal Reserve to combat lingering inflation, have strengthened the U.S. dollar, a headwind for precious metals. While gold has shrugged this off due to its safe-haven status, silver’s industrial exposure makes it more sensitive to economic slowdowns, particularly in manufacturing-heavy regions like China and Europe.
To fully appreciate the 99.7:1 ratio’s significance, let’s explore its historical behavior in greater detail:
- Pre-20th Century: Ancient civilizations, from Egypt to Rome, often fixed the ratio at 12:1 to 15:1, reflecting silver’s role in coinage alongside gold. This stability persisted until the 19th century, when silver’s demonetization began.
- 20th Century Shifts: The 1913 Federal Reserve Act and the 1933 gold confiscation in the U.S. disrupted bimetallic standards, pushing the ratio higher. By the 1970s, after the Nixon Shock ended the gold standard, the ratio averaged 40:1 to 60:1.
- 1980 Hunt Brothers Episode: The infamous attempt to corner the silver market drove prices to $50 per ounce, collapsing the ratio to 15:1. This speculative frenzy highlights silver’s potential when retail interest ignites.
- 2008-2011 Bull Market: Post-financial crisis, silver soared from $9 to $49, outpacing gold and dropping the ratio to 30:1. Silver’s 444% gain dwarfed gold’s 166%, showcasing its leverage in bull markets.
- 2020 COVID Spike: The ratio hit 125:1 in March 2020 as markets panicked, marking silver’s cheapest point relative to gold in modern history. It later normalized to 68:1 by 2021.
The current 99.7:1 ratio, while not at 2020’s extreme, is a statistical outlier. Historical data suggests that ratios above 80:1 are unsustainable, often triggering silver rallies as investors capitalize on the imbalance. The MarketWatch article’s emphasis on this metric aligns with decades of market behavior.
The stars are aligning for silver to close the gap with gold. Here are the key drivers, as outlined by MarketWatch, with additional insights:
Monetary Policy Pivot Central banks, including the Federal Reserve, are signaling potential rate cuts in late 2025 or early 2026 as inflation stabilizes and growth slows. Lower rates weaken the U.S. dollar, a tailwind for precious metals. Silver’s higher beta (volatility relative to gold) means it often amplifies gold’s gains. During 2008-2011, silver’s 444% surge far outstripped gold’s. A similar dynamic could unfold, pushing silver toward $50-$80 per ounce.
Green Energy Revolution Silver’s role in renewable energy is a game-changer. In 2024, photovoltaic demand for solar panels consumed 15% of global silver supply, with projections of 10% annual growth through 2030, per MarketWatch. Global commitments to net-zero emissions, led by China, India, and the EU, are driving solar installations. A single solar panel requires about 0.6 ounces of silver, and with 400 gigawatts of new capacity planned annually, this translates to 240 million ounces of demand by 2030—20% of current supply. Additional uses in 5G, electric vehicles, and medical antimicrobial coatings further tighten the market.
Supply Squeeze Intensifying The silver supply deficit is a ticking time bomb. Mine production has stagnated at 800 million ounces annually, with top producers like Mexico (down 5% in 2024) and Peru facing geological and regulatory challenges. Recycling, capped at 200 million ounces, can’t close the gap. The Silver Institute estimates a 2025 deficit of 200 million ounces, the largest in a decade. As inventories dwindle, prices could spike, especially if speculative buying returns, as True Gold Republic predicts.
Ratio Reversion and Investor Awakening The gold-silver ratio’s mean-reverting nature is a powerful catalyst. A drop to 60:1 implies $54.82 per ounce; 40:1 suggests $82.23; and 30:1, seen in past bull markets, points to $109.63. Social media platforms like X are buzzing with posts about the ratio’s extremes, hinting at growing retail awareness. As institutional investors, who have largely ignored silver, join the fray, capital inflows could accelerate the correction.
Geopolitical and Inflationary Pressures Ongoing geopolitical risks—U.S.-China tensions, Middle East conflicts, and European energy concerns—bolster precious metals. Persistent inflation, even if moderating, keeps real interest rates low, favoring silver and gold. Silver’s affordability compared to gold makes it an attractive entry point for retail investors seeking inflation hedges.
Physical Silver: Buying coins (e.g., American Silver Eagles, Canadian Maple Leafs) or bars provides direct exposure. Physical silver is ideal for long-term holders.
Risks and Considerations
Silver’s potential comes with caveats. Its volatility—30% annualized versus gold’s 15%—can lead to sharp drawdowns. A stronger U.S. dollar, driven by unexpected rate hikes or economic strength, could pressure prices. Industrial demand, while robust, is sensitive to global manufacturing slowdowns, particularly in China. Silver’s reliance on retail speculation means rallies can be delayed if sentiment lags. Geopolitical de-escalation or a deflationary shock could also dampen precious metals demand. Investors should diversify and size positions appropriately.
Beyond its investment merits, silver’s undervaluation reflects broader economic and technological shifts. Its role in the green energy transition positions it as a critical commodity in the fight against climate change. Unlike gold, which is primarily a financial asset, silver bridges the gap between monetary and industrial value, making it a unique play on both economic uncertainty and technological progress. The 99.7:1 ratio isn’t just a technical signal—it’s a reflection of market inefficiencies that savvy investors can exploit.
Moreover, silver’s affordability democratizes precious metals investing. At $32.98 per ounce, a $1,000 investment buys 30 ounces of silver but only 0.3 ounces of gold. This accessibility, combined with silver’s historical tendency to outperform in bull markets, makes it a compelling option for retail investors seeking high-upside opportunities.
At $32.98 per ounce, silver is a screaming bargain against gold’s $3,289, with the gold-silver ratio’s 99.7:1 level signaling one of the deepest undervaluations in modern history. As argued in MarketWatch, silver’s lag stems from gold’s safe-haven dominance, silver’s speculative nature, and delayed pricing of supply deficits. Yet, with monetary easing, a green energy boom, tightening supply, and an inevitable ratio correction on the horizon, silver is poised for a historic breakout. Whether you’re a seasoned investor or a newcomer, silver’s “sleeping giant” status demands attention. Act before the market wakes up, and you could ride a wave that echoes the great silver rallies of 1980 and 2011.
Disclaimer: Precious metals investing involves risks, including volatility. Conduct thorough research or consult a financial advisor before making decisions.
Source: Based on the MarketWatch article from May 28, 2025, “This indicator says silver is undervalued. Why silver hasn’t caught up to gold—yet,”
Latest
.jpg)
.jpg)
.jpg)
.jpg)
.avif)
