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Gold-silver ratio: Gold prices have surged 73% in a year, but this performance gets eclipsed by the sharp 171% gains delivered by silver during this period, despite the pullback seen in prices over the last two trading sessions that ended January 30.

Silver rate cracked 27% on Friday to trade around $84, and gold tumbled 9% and hovered at $4,865 as investors were spooked by US President Donald Trump's nomination of Kevin Warsh as chair of the US Federal Reserve.

According to the data by The Conversation, silver's spectacular gain had come with 36% "annualised volatility", which measures how much a stock price varies over one year. This was nearly double that of gold's 20% volatility over the same period.

What it signals is that what goes up fast can come down quickly, too.

This is being signalled by the gold-silver ratio as well. The ratio had hit 46 mark on Thursday, only to rebound to 57 amid the sharp reversal in silver prices. Analysts had warned that a gold-silver ratio below 50 levels signals that silver is no longer cheap.

The gold–silver ratio is calculated by dividing the price of one ounce of gold by the price of one ounce of silver, indicating how many ounces of silver are required to purchase one ounce of gold.

It measures the relative value between the two precious metals and is commonly used by investors to assess market conditions. A high ratio suggests gold may be overvalued relative to silver, while a low ratio may indicate silver is relatively expensive. During periods of market volatility, the ratio can help guide decisions on whether gold or silver may offer better value.

The gold-silver ratio remains significantly below the 10-year ratio averages close to 80:1.

"When it drops below 50:1, silver is no longer cheap. In previous cycles, a ratio this low has preceded a mean reversion where silver prices corrected significantly faster relative to gold," said a report by WhiteOak Capital Mutual Fund, and a trend which was already reflected in Friday's session.

Harshal Dasani, Business Head at INVasset PMS, said that the sub-50 levels in the gold-silver ratio are typically seen only during sharp silver outperformance phases, such as in 2011. This compression does not necessarily mean silver has become “expensive” in absolute terms, but it does indicate that a large part of the relative re-rating has already played out, he opined.

Silver’s higher volatility means that once the ratio compresses to these levels, incremental returns tend to become more uneven and drawdowns sharper, he added.

When precious metals like gold and silver start to rise, it is seen as a signal of poor macroeconomic wealth. WhiteOak Capital's report stated that when gold “talks”, it mainly signals geopolitical tensions, systemic risks inside or outside major global economies, and may portend currency devaluation because of the above risks.

But, it cautioned that when silver begins to "scream", outperforming gold with high velocity/parabolic moves, it often signals the final, speculative stage of a run; one that historically ends against investors’ best interests, the fund house cautioned.

For investors, the key takeaway is portfolio discipline rather than a binary call on metals, opined Dasani. From an asset-allocation perspective, it makes sense to trim some silver exposure and shift part of that allocation into gold that can help stabilise portfolios, as gold typically performs better in risk-off or consolidation phases, he added.

"The broader precious metals theme remains intact, but the risk–reward is now more balanced, calling for calibration rather than aggression," as per Dasani.

Sharing a sharp warning call for silver, Amit Goel of Pace 360 told Mint that silver price weakness is expected to continue as he sees silver at $50/oz ( ₹2 lakh) by the end of June 2026.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.

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