Is Silver Undervalued During the “Gold Fever”? Gold/Silver Ratio (GSR)

Silver has recently broken above $54.40/oz in the wake of the current gold run, also driven by tight refined silver supply. The gold/silver ratio (GSR) has compressed from above 100:1 earlier this year down towards 80:1, which many interpret as silver catching up relative to gold. The GSR measures how many ounces of silver it takes to buy one ounce of gold. Historically, the figure is set within the 50-70 range.

Supply vs demand dynamics

XAGUSD’s rise is bolstered by both investor interest and industrial demand. Silver is much more consumed in industrial use (solar, electronics, etc), its supply is largely tied to by-production - hence, it is less responsive to price increases. Conversely, gold tends to be held in vaults and rarely consumed.
Thus, when investment demand surges, silver can experience sharper upward moves. This structural asymmetry often supports the case that silver can outperform gold.

Thus, when investment demand surges, silver can experience sharper upward moves. This structural asymmetry often supports the case that silver can outperform gold.

Valuation

Because central banks buy gold as a reserve asset, silver's price movements are more volatile. If gold's price rises, silver's potential gains are amplified and may even overshoot. However, this also means silver faces greater downside risk if economic demand weakens.

Technical outlook for silver vs gold

Silver recently broke its all-time high of $54.41/oz. Momentum is still strong, RSI index lies within a positive territory.

Given the sharp move, technical pullbacks or consolidation are possible before a further leg up.