Silver vs Gold: What Does the Future Look Like for Silver?

Between silver and gold there is a complex relationship. Silver is often seen as the 'poor man's gold' and has been struggling to keep up with the Gold price to surpass. This year, silver fell to €18.93 per ounce and rose to €23.60, while gold experienced more steady growth. Despite the fluctuations, silver has generally underperformed gold, which begs the question of why this is the case.

Gold/silver ratio

The ideal Gold-silver ratio is said to be 16:1, based on their natural occurrence in the earth's crust. However, this ratio has fluctuated greatly over time and now stands between 78 and 85. This fluctuating ratio suggests significant potential for a price appreciation of silver in the near future.

Shortages in the silver market

Gold is more stable in times of crisis, while silver is more sensitive to economic fluctuations. Since 2011, silver has consistently underperformed gold, except for 2016 and the first few months of 2023. According to the Silver Institute, there is a Major shortage of silver, with record demand in 2022. Despite this shortage, the Silver price not showing much appreciation, which raises questions about the relationship between supply, demand, and price.

The demand for silver is expected to increase, mainly due to its use in solar panels. In fact, it is suggested that the underground silver reserves could only last until 2030 or 2035, underscoring the need for new exploration.

Conclusion

Investor sentiment remains the most significant influence on the price of silver. While the gold/silver ratio and market dynamics offer some clues, there are no guarantees. Price movements are influenced by a multitude of factors such as macroeconomic conditions, industrial demand, and investor interest. If these coincide favorably, then silver could finally step out of gold's shadow and shine on its own.

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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here  to subscribe. 

Author: Sanjiv Arole

Source: Solitaire International