The gold-silver ratio has rarely broken 100! Is silver expected to welcome a valuation repair window?

In mid-April, the precious metals market showed a divergent pattern. As of April 21, 2025, the gold-to-silver price ratio (hereinafter referred to as the gold-silver ratio) climbed to 105.26, significantly rising over 40% compared to the recent 100-year average range of 50 to 80.

This rare phenomenon has only occurred five times in the past century, corresponding to the early stages of World War II, the period of the Soviet Union's dissolution in 1991, the outbreak of the COVID-19 pandemic in 2020, the initial phase of the Federal Reserve's aggressive interest rate hikes in 2022, and the current period of global trade friction and policy gamesmanship. The common characteristic of these periods is a surge in global risk aversion, a sharp increase in uncertainty, with gold becoming a safe haven for funds due to its monetary attributes, while silver, due to its industrial attributes, faces pressure from declining demand expectations. This situation, where risk-averse funds skew towards gold and industrial demand suppresses silver prices, has directly led to the gold-silver ratio soaring to an abnormal level above 100. The gold-silver ratio exceeding 100 is not only an extreme pricing of stagflation risk but also indicates that the valuation recovery window for silver is gradually opening.

Industrial Attributes Suppress Silver Prices

Currently, the divergent price trends of gold and silver stem from their attribute differences and macroeconomic background. Firstly, the global political and economic situation is becoming increasingly complex. Factors such as escalating trade frictions, doubts about the independence of U.S. monetary policy, and intensified geopolitical conflicts have triggered strong risk aversion in the market. Gold, as a traditional safe-haven asset and international reserve currency, is favored by the market in an environment of high inflation pressure, severe fluctuations in financial markets, and rising geopolitical risks, leading to new highs in gold prices. Meanwhile, silver possesses "dual attributes"; while its safe-haven property can bring some benefits during increased macro uncertainty, its industrial property simultaneously subjects it to the drag of weakening economic growth expectations. Currently, the global manufacturing PMI has been in a contraction zone for three consecutive months, with the global manufacturing PMI for April at 48.9%. Industries with high silver demand, such as electronics and photovoltaics, continue to destock, and the slowdown in global manufacturing growth and weakening demand expectations in sectors like electronics and photovoltaics further suppress the fundamentals of silver. The result is a significant rise in gold prices while silver remains relatively weak, pushing the gold-silver ratio to a rare high.

The Value of Silver Allocation Gradually Emerges

In light of the historic divergence in the gold-silver ratio, it is particularly necessary to examine the valuation logic of silver.

On one hand, from the perspective of historical relative value, the historical average of the gold-silver ratio has consistently maintained between 50 and 80, with most fluctuations over the past few decades not exceeding 90. Now that the gold-silver ratio has surpassed 100, it indicates a significant discount of silver relative to gold. If market sentiment gradually returns to rationality in the future, the gold-silver ratio has the potential to revert to its historical average, suggesting that silver has significant upside potential relative to gold at current levels.

On the other hand, from a fundamental perspective, the silver market has recently exhibited a dual characteristic of supply tightness and demand growth, providing solid support for its valuation recovery. Global silver mine production has been hampered by declining ore grades, with production growth slowing to 1.2%, at a near five-year low. On the demand side, the acceleration of photovoltaic installations and the increasing penetration rate of new energy vehicles form dual engines, with global photovoltaic new installations expected to rise by 18% year-on-year to 660 GW in 2025;The popularization of N-type batteries is driving silver consumption to increase to 10 tons/GW; the production of new energy vehicles has surpassed 40 million units, with silver usage per vehicle increasing by 71% compared to fuel vehicles, reaching 35 grams; industrial silver demand may exceed 7,500 tons this year. Notably, the consumption rate of silver inventories has also exceeded expectations, with LBMA deliverable inventories dropping to 22,000 tons, a 45% reduction from the peak in 2020. Additionally, from the perspective of absolute prices and inflation expectations, the current silver price is $30.8 per ounce, which is 38% lower than the nominal peak in 2011. If calculated based on the actual purchasing power corresponding to the peak in 1980, the current silver price is only equivalent to 17.5% of the historical high, indicating a rare degree of undervaluation. Considering the inflation effects brought about by global loose monetary policies over the past decade, the actual price level of silver appears even more undervalued. Taking into account the above factors, from the perspectives of relative valuation, supply and demand conditions, and historical price levels, the undervaluation characteristics of silver are evident, presenting a high allocation value.

Overall, the current gold-silver ratio has surpassed 100, reflecting market concerns about a stagflation environment. Historical experience shows that extreme divergence often breeds reversal momentum. Looking back at the two periods in 1991 and 2020 when the gold-silver ratio fell below 80, it took an average of only 4 months for silver prices to rise significantly.

By 2025, the medium-term bullish factors for silver will gradually accumulate. Although short-term prices remain under pressure, both the fundamentals and the capital situation are performing well. As of April 22, the non-commercial net long positions in COMEX silver futures have increased to 23,329 contracts, a 6.3% increase month-on-month, indicating initial signs of speculative capital entering the market. The gold-silver ratio will ultimately achieve mean reversion through a short-term correction in gold prices or an increase in silver industrial demand to boost prices. The current market is in a phase prioritizing odds, and as market panic eases, the gold-silver ratio will soon welcome a window for valuation reconstruction. Investors need to maintain composure amid market fluctuations and capture certain signals of convergence in the gold-silver ratio and industrial cycle resonance.

Author of this article: GuoXin Futures analysts Feng Da and Zhang Jiayi, source: Futures Daily, original title: "The Gold-Silver Ratio Rarely Surpasses 100! Is Silver Expected to Welcome a Valuation Repair Window?"