Why Gold Will Outperform Silver in 2027

With just four months remaining in 2026, now is a fine time for investors to prepare for 2027 by establishing some new positions or, at a minimum, building watch lists. Hey, it pays to be organized.

Part of that exercise should include examination of commodities and the related exchange-traded funds (ETFs) because with inflation still stubbornly high in the U.S., hedges against elevated consumer prices could prove valuable next year.

Gold is likely to outpace silver in 2027. Image source: Getty Images.

Speaking of hard assets, many commodity comparisons pit gold and silver, two of the most frequently traded commodities in the world, against each other. It makes sense because they're the big kahunas of the precious metals world. While gold and silver are often mentioned in the same breath, one is the better 2027 bet, and it's gold.

Let's explore why the yellow metal could leave silver behind next year, using the SPDR Gold Shares (NYSEMKT: GLD) and the iShares Silver Trust (NYSEMKT: SLV) as the bogeys.

Silver poised for second place

In sports parlance, silver is a competitor's reward for a second-place finish. But as the iconic line from Top Gun (the original) goes, "There are no points for second place." Think of the iShares fund and other silver ETFs as potentially residing somewhere in the middle of "yay, second place" and "no points" over the course of 2027.

Yes, silver is correlated to gold, but that doesn't always mean what's good for the goose is also good for the gander. Some of the catalysts that propelled silver to stellar 2025 gains, including tightness in the physical market, are off the table. Compounding that issue is the fact that, with that situation resolved, on days when gold retreats, silver's pullbacks will be deeper.

Other issues could hamper the iShares fund and silver futures over the course of 2027. Some investors know that silver has a variety of industrial applications, including prominent use in the production of solar panels. On that note, data indicate that earlier this year, China imported massive amounts of silver ahead of the elimination of tax rebates on solar products. So demand there could wane in the coming months. Plus, more solar panel producers are embracing what's known as silver-thrifting, which is a way to reduce the amount of silver used in panel production to cut costs.

Perhaps compounding that problem is that demand in India, also a major silver-importing market, is trending downward due to imposed import levies. These factors don't mean that silver is headed to the 2027 commodities doghouse, but they can be taken as signs that gold may be the safer, better-performing commodity next year.

Tailwinds abound for gold

The case for gold topping silver in 2027 is compelling and not rooted in "hopium." Rather, the stars may be aligning for a year in which gold just doesn't beat silver, but also one in which the yellow metal ranks as one of the best-performing assets of any stripe.

With Uncle Sam sitting on a jaw-dropping $40 trillion in debt, the monetary debasement trade is gaining momentum, and that's an obvious catalyst for non-government-backed money, such as gold.

So what happens if the Federal Reserve raises interest rates to dampen inflation and the ill effects of that debt? Isn't that bad for both gold and silver? Possibly yes, simply because neither metal pays dividends or interest, making them unattractive when bond yields are high. However, there's support for gold prices from central bank purchases, a backstop silver doesn't have.

Here's another interesting kicker that settles the gold-versus-silver debate. Some experts believe the gold-to-silver price ratio, which measures how many ounces of the latter it takes to buy one ounce of the former, is poised to normalize by 2027. History says that when that happens, the tide often turns in favor of gold bullion.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.