Silver's 8% rally in June outshines gold. Which precious metal can offer better returns going ahead?
"Both gold and silver have put on a fantastic show since the start of 2025; however, in the first four months, gold's pace significantly exceeded silver's. Post President Trump's 'Liberation Day' action in April, gold prices picked up a significant pace but eased as trade talks started to take place and tariff fears reduced. Silver, along with industrial metals thereafter, gained momentum and caught up to gold's pace," said Manav Modi, Senior Analyst, Commodity Research at Motilal Oswal Financial Services.
Gold also took a hit, amidst a easing off in risk premium, ambiguity in rate cuts from the Fed, and a breather in tariff and geopolitical tensions, putting a pause in bullion's rally.
Apart from these, analysts also attribute the outperformance in silver prices last month to rising industrial demand and supply deficits.
Silver has unique properties of both a precious and industrial metal, which has bolstered its demand. Approximately 60% of silver's demand stems from industrial applications, including electronics, solar panels, and electric vehicles, contributing to the silver price rally.
Silver supply has been constrained due to underinvestment in mining, especially as silver is often a byproduct of other mined metals, said Nirpendra Yadav, Senior Commodity Research Analyst at Bonanza. This has led to a supply deficit for the fifth consecutive year.
Moreover, depleting inventories and a record ETF inflows of over $1.6 billion in June boosted market sentiment for the metal.
"Like gold, silver serves as a hedge against inflation and currency debasement. However, due to its smaller market size, silver often experiences more significant price swings, offering higher potential returns during bullish periods," the Bonanza analyst added.
Analysts see a decline in the gold-silver ratio as a technical trigger powering the rise in silver prices. The ratio is a financial metric which shows the number of ounces of silver needed to buy one ounce of gold.
Investors often use the ratio to gauge whether gold or silver is relatively overvalued or undervalued. A higher ratio suggests silver is undervalued and vice versa.
Silver outperformed gold in June because of the fall in gold-silver ratio from over 100 to around 92-93 (fall in the ratio leads investors to move towards silver) combined with the critical $35/ounce mark that triggered momentum and technical buying on breakout, said Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One.
Going ahead, the outlook for gold prices does not seem as promising, with Modi of MOSL suggesting that gold might need fresh triggers for a further boost in prices, while silver could continue to trade with a positive bias.
In the near term, Modi expects silver's outperformance over gold to continue. However, he added that as gold is considered a safe haven asset and is less volatile than silver, it is always recommended to have both in an investor's portfolio and diversify it based on one's risk profile, Modi added.
Mallya also believes that silver prices have the potential to outperform gold for the rest of the year, because gold is just an asset which is a safe haven, while silver is both a precious and an industrial metal.
"Its usage in the automobile industry, clean energy trends and tech adoption, specifically the rise of Electric Vehicles adoption globally, ongoing tightness in supply, and possible ETF inflows in the months ahead are a combination of factors for silver to perform better in comparison to gold," said Mallya. Silver: ₹ 1,25,000/kg possible targets by end of 2025 in the Indian markets
1,25,000/kg possible targets by end of 2025 in the Indian markets Gold: ₹ 1,10,000/10 gms in the Indian markets in the same time frame.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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