IN a world increasingly rattled by global tensions and market volatility, the allure of precious metals has never been more pronounced. For all classes of investors, from seasoned traders to those just starting out, metals are timeless assets that serve as a hedge against inflation and currency swings.
Gold has taken centre stage, outperforming many other major assets with returns of 27.5 per cent in 2024, while US stocks and bonds rose 25 and 6 per cent, respectively.
While the spotlight might be on gold, silver is quietly carving out its own niche, offering unique opportunities that one should not overlook. From January 2023 to December 2024, silver has delivered a price return of 20.3 per cent. Increasingly, silver is turning into a compelling asset that can shine in various market conditions.
Right time for silver?
In the early days of the Covid-19 pandemic, gold prices surged by approximately 14 per cent from December 2019 to March 2020, as investors flocked to safe-haven assets amid uncertainty. Silver, on the other hand, dipped 34 per cent in the same period because of concerns over industrial demand for it. Historically, silver has shown a tendency to outperform gold during the later phases of gold bull markets.
As new information about Covid-19 emerged and economic optimism grew with the announcement of vaccines, investors likely shifted their focus away from gold. Consequently, gold experienced a dip of 19 per cent from August 2020 to April 2021. In contrast, silver gained 58 per cent in the same period, underscoring its potential for outsized gains.
Likewise in 2011, gold reached nearly US$2,000 per ounce as a result of the global financial crisis, while silver peaked just under US$50 an ounce. As at Feb 25, 2025, with silver trading around US$32 – approximately 33 per cent below its all-time high in 2011 – there remains significant room for growth while gold appears to be levelling out at approximately US$2,700.
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You might ask whether silver is worth the investment – and when is a good time to invest. To answer this, one must consider the gold-silver ratio. It is a metric that measures the relative value of gold to silver; it indicates how many ounces of silver are needed to purchase one ounce of gold.
This ratio helps identify potential overvaluation or undervaluation in the market. A higher ratio often signals a favourable time to invest in silver.
The “80/50” rule is a widely recognised guideline. When the ratio exceeds 80 ounces of silver for each ounce of gold, it may be prudent to pivot towards silver. Conversely, when the ratio dips below 50, gold is perceived to be more favourable.
Let us look at the timing. The current gold-silver ratio and historical performance suggest that silver could be poised for a significant rally, especially as market dynamics shift.
As at Feb 25, 2025, the gold-silver ratio stands at 91.6, with gold priced at US$2,931 per ounce and silver at US$32.11. This suggests that silver is currently undervalued relative to gold. For those looking to break into the world of precious metals, it still presents an opportunity to buy in at a relatively affordable entry point.
Why silver will continue to gain traction
Will silver maintain this upward trajectory? Firstly, silver is experiencing record-breaking industrial demand – overall demand for silver rose to 1.21 billion ounces in 2024, representing a global rise of about 7 per cent. The metal is widely used in green energy and applications such as the burgeoning solar and electric vehicle (EV) industries. Global EV sales rose by 25 per cent in 2024, and silver is used in EV batteries and in charging ports. Silver also plays an important role in artificial intelligence technology where it is used in areas such as thermal conductivity and photovoltaic cells.
Then, there is the scarcity issue. In November 2024, the Silver Institute reported that supply of the metal was set to record a physical deficit in 2024 for a fourth consecutive year, with mining production rising by just 1 per cent.
At this point you may wonder: Will Trump 2.0 affect the demand for silver and its performance? After all, on Feb 3, 2025, US President Donald Trump issued two executive orders that appeared to set back the progress on EVs and wind power. Yet, investment in clean energy remains strong in other regions with governments introducing supportive initiatives.
In January, the Chinese government announced that it will renew a subsidy for buyers who trade in an old car for a new EV or plug-in hybrid. Likewise, in December 2024, the European Commission announced a 4.6 billion euro (S$6.5 billion) investment in net-zero technologies, EV battery cell manufacturing and renewable hydrogen.
These factors taken together suggest that there remains room for silver to rise. However, it is important to note that its price can swing dramatically in the short term compared to gold – which still has more support from central banks and large institutions.
The writer is trading strategist, OCBC Securities