Silver Underpriced Relative to Gold

Some big price moves unfolded this week in the silver market... and the poor man's gold is looking super strong right now after breaking above the key $37 level.

The rally since early June pushed silver from $33 to over $38 as of today. That's a big move, but the white metal remains historically underpriced based on several metrics.

To begin with, there is still a historically wide gap between the price of silver and the price of gold.

The gold-silver ratio tells you how many ounces of silver it takes to buy one ounce of gold. The ratio is hovering at just under 90-to-1. In the modern era, that ratio has averaged closer to 60-to-1. In other words, even with the recent rally, silver is underpriced compared to gold.

Historically, when the ratio has gotten out of whack like this, it has eventually snapped back to the mean with a surge in the price of silver. This has often happened in the midst of a gold bull rally, with silver outperforming gold.

For instance, in 2020, the gold-silver ratio set a record of 123-to-1 as Covid hysteria gripped the world. From there the ratio then plunged to around 60-to-1 as central banks around the world cranked up the money creation machine to cope with governments shutting down economies.

In another example of this snap-back, the gold-silver ratio fell to 30-to-1 in 2011 after rising to over 80-to-1 during the money creation of the Great Recession in the wake of the 2008 financial crisis.

Before the recent rally, the ratio topped out at over 100-to-1. So, silver has closed the gap some, but there is still a long way to go before we’re back to the historical average.

Silver also appears underpriced given the supply and demand dynamics.

In fact, silver demand outstripped new supply for the fourth straight year in 2024 as industrial demand set another record.

Despite record industrial offtake, overall silver demand fell by about 3 percent to 1.16 billion ounces in 2024. This was primarily due to tepid investment demand, with coin and bar buying falling 22 percent to a five-year low.

Even so, global silver demand exceeded silver supply last year, resulting in a structural market deficit of nearly 149 million ounces.

These market deficits are expected to continue. And when the broader investing public hops on the train, we could see even larger supply shortfalls -- with above-ground silver supplies slowly draining out and mine production struggling to ramp up.

Fundamentals are important. But silver has an extremely bullish technical setup with its classic “cup and handle” chart. Visit MoneyMetals.com for a visual of what I am talking about.

You will see the “cup” with the twin highs of around $50 per ounce in 1980 and 2011. Following the 2011 peak, we see a sharp decline in the price, followed by a sideways consolidation “handle."

The handle pattern on the chart of a stock or commodity often precedes a breakout.

This cup-and-handle pattern in silver has played out over an extremely long period of time. Historically, this longer pattern, often referred to as a secular cup and handle, portends a bigger breakout with a broader base – signaling a bigger upside case.

Gold actually followed a similar long-term pattern, resolving with a breakout to new all-time highs back in 2023.

Analyst Clive Maund argues that the technicals show silver is poised for another up-leg similar to the one we saw in June. We may already be seeing the start of that predicted up-leg here at the end of this week.

Taken together, the technicals and the supply and demand dynamics tell us that – despite the recent rally – silver is still on sale, and its bull market has a bright future ahead.

At the same time, we're seeing premiums on retail forms of gold and silver at multi-year lows. That means virtually all of a new purchaser's investment in bullion coins, bars, and rounds goes into ounces of the metal itself. You can find some truly great deals at MoneyMetals.com right now – such as Pre-1965 silver coins at just 69 cents over the spot price!

Quite frankly, the reason premiums are low is because – at least here in the U.S. – there seem to be more folks selling their gold and silver holdings than buying. That has led to a glut of inventory, and lower costs on that inventory for those wishing to step in.

Unlike Asia, the American public is not yet flocking into precious metals. Most folks here are still oblivious to its wealth protecting and wealth creating features. But as gold and silver continue to grab more headlines, that situation threatens to change.

For now, though, our Money Metals customers are among an elite few who recognize what is going on – and have been taking action.

Well, before we get to this week’s interview, let’s take a look at the market action in the metals. Gold, is having somewhat of a quiet week, up just 0.7% to come in at $3,370 an ounce.

Silver meanwhile is having a banner day after trading mostly sideways through Thursday’s close. The white metal is on a heater here today and is up over $1. It currently trades at $38.38, good for a 3.4% weekly advance and a fresh 14-year high.

Platinum is down 0.7% to trade at an even $1,400 an ounce, but its sister metal palladium is having a nice run, up 6.9% or $80 on the week – with most of that coming here today – to check in at $1,240 an ounce as of this Friday morning recording.

And finally, we’d be remiss if we didn’t mention copper, which – thanks to new tariff fears – is up 10% to come in at $5.59 a pound. Doctor Copper, as they call it, reached an all-time high of $5.69 just two days ago and has pulled back a bit since that midweek peak.

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