Frenzy Returns. Gold-Silver Ratio Drops Below 50 to 14-Year Low, Why Is Goldman Sachs Going Long Against the Trend?

TradingKey - Since the start of 2026, the global metals market has sustained its "opening rally," with most commodities trending sharply higher. Gold , silver, copper, tin, and other major varieties have all hit record highs, as market sentiment remains bullish and capital continues to flow in.

Among them, silver's performance has been particularly stellar. Data show that in just the past 50 days, silver prices have risen by more than 80% cumulatively, far outperforming gold. This week, spot silver prices broke through the $90/oz mark, while the "gold-to-silver ratio"—a key metric for their relative pricing—briefly dipped below 50, a 14-year low.

Augustin Magnien, Head of Precious Metals Trading at Goldman Sachs, noted that silver is currently at the center of global trade and geopolitical maneuvers—the U.S. has included it in its "Critical Minerals List," while China is tightening export controls. Concurrently, factors such as portfolio diversification needs and expectations of Fed easing have converged to drive silver prices to record highs.

Is it a speculative bubble or a structural repricing?

Since the beginning of 2025, silver prices have staged a powerful rally, with a cumulative gain of 190%, far exceeding gold's 75%. The ratio of their respective gains is nearly 2.5 times. Meanwhile, the gold-to-silver ratio plummeted from a previous high of 105 to around 50, meaning that relative to gold, silver is currently in a historically "overvalued" range .

However, most industry analysts do not view this as a purely speculative rally. They point out that the essence of the sharp decline in the gold-to-silver ratio is not driven by short-term sentiment, but rather by a revaluation of silver's worth as a "strategic resource" and "critical industrial metal" .

Historically, since 1980, every significant narrowing of the gold-to-silver ratio has been closely linked to a recovery in manufacturing activity. The logic is: economic recovery → rising manufacturing PMI → increased industrial demand for silver → silver outperforming gold → gold-to-silver ratio falling.

However, the current move has broken this pattern. The U.S. Manufacturing Purchasing Managers' Index (PMI) remains below the 50-point expansion threshold at 47.9 and has been sluggish for 10 consecutive months, yet the gold-to-silver ratio has fallen significantly. This "decoupling" suggests that the current surge in silver is not driven by the traditional manufacturing cycle but is instead led by a new logic.

The latest data from Vanda Research shows that silver's trading activity is currently 2.1 times its 3-month moving average, surpassing the market fervor for both gold and cryptocurrencies.

Unlike the "silver short squeeze" of 2021, the current capital inflows appear more structural and long-term.

In the past 30 days alone, retail investors have poured $920 million into silver-related ETFs—such as SLV, PSLV, and AGQ—a record high for a single month.

At the same time, the world's largest silver ETF, the iShares Silver Trust (SLV), has seen net retail inflows for 169 consecutive trading days, an unprecedented record.

Drivers for Silver’s Rise Transcend Traditional Industrial Cycles

The underlying cause of this phenomenon is that as the global manufacturing landscape shifts, the weight of U.S. manufacturing in the global economy has gradually decreased, while actual demand for silver from emerging markets, including China, India, and Southeast Asia, is rising rapidly. Additionally, geopolitical factors and resource security issues have made silver's strategic status increasingly prominent.

Currently, silver is transitioning from a traditional precious metal to a "critical metal for the future." It plays a vital role in several emerging industries such as electric vehicles, photovoltaic technology, AI chips, and data centers—being the most conductive of all metals, it is irreplaceable in core areas like efficient power transmission, information processing speeds, and solar energy conversion.

This also explains why the market's perception of silver's value has shifted—it is no longer just a "cheaper alternative to gold," but a core functional metal supporting green energy and digital transformation. Recently, several major economies have included silver in their "critical minerals" or "rare metals" lists, further strengthening its strategic attributes.

From a fundamental perspective, silver is experiencing a structural supply-demand mismatch. Global silver mine production growth has virtually stalled since 2015, with annual output lingering between 30,000 and 33,000 metric tons. On the other hand, demand from sectors like photovoltaics, automotive, and electronics has continued to expand since 2021. Data indicates that actual silver consumption has exceeded supply for several consecutive years, leading to a steady drawdown of inventories. In 2024, silver usage in the solar sector jumped by nearly 70% year-over-year, further exacerbating supply tightness.

Meanwhile, market expectations are intensifying price volatility. Rumors suggest the U.S. may impose high tariffs on silver imports (potentially up to 50%), leading to a scramble to "front-run" silver shipments to the U.S. soil, which has worsened inventory tightness in the London market. This liquidity squeeze acts as an amplifier for sharp price swings, potentially pushing the market into irrational territory.

However, the market occasionally faces risks of overheating.

Commodity strategists at BMO Capital Markets pointed out that while structural drivers for silver remain, the risk of a correction after an overheated rally cannot be ruled out.

The firm expects that as supply gradually recovers, the physical silver market could shift from tight to a slight surplus, potentially putting the gold-to-silver ratio back on an upward path toward historical trends. According to its historical model, there has been a significant long-term correlation between silver supply surpluses and the gold-to-silver ratio since the collapse of the Bretton Woods system: when supply exceeds demand, the gold-to-silver ratio typically trends upward; silver only outperforms gold when supply-demand conditions tighten.

Furthermore, from an industrial application perspective, while investment demand has driven the current price rise, future trends will depend more on whether terminal consumption can continue to grow. BMO specifically noted that silver consumption in the solar industry may have reached a plateau. As the computational efficiency revolution slows, new material substitutes remain immature, and manufacturing cost-reduction trends persist, the marginal price of silver in certain industrial chains could face pressure.

Gold: The Undervalued King

While the market is focused on silver's strong performance, Goldman Sachs pointed out that gold also achieved exceptional returns in 2025, with an annual gain of 67%. Against the backdrop of a sharp drop in the gold-to-silver ratio, gold's status as a core alternative asset for hedging against dollar risks has been overshadowed by the short-term hype in the silver market. However, the long-term value logic for gold continues to evolve steadily.

Goldman Sachs believes that gold ETF allocations currently represent only 0.17% of non-cash financial investment portfolios in the U.S., far below the 2012 record high, indicating further room for growth in gold positioning.

Compared to silver, gold possesses more significant structural advantages, particularly supported by continuous purchases from global central banks. Goldman Sachs predicts that average monthly gold purchases by global central banks will reach 70 tons in 2026, far exceeding the pre-2022 monthly average of approximately 17 tons; this long-term and stable official demand will provide a solid floor for gold prices.

Furthermore, historical data shows that silver's volatility is much higher than gold's, particularly during periods when silver outperforms, often leading to a sharp contraction in the gold-to-silver ratio.

In 2025, silver achieved an outperformance of approximately 82 percentage points over gold, the largest margin in 20 years. While this strength has driven a precipitous fall in the gold-to-silver ratio, Goldman Sachs warned that the factors supporting silver's rise may be unsustainable.