<p>The <a href="https://www.linkedin.com/pulse/what-gold-silver-ratio-why-should-we-pay-attention-money-metals-qjbxe/" rel="noopener noreferrer" target="_blank">gold-silver ratio</a> has surged to over 90-1.</p>
<p>This indicates that silver is extremely underpriced from a historical perspective.</p>
<p>In other words, silver is on sale.</p>
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<p>The last time we saw a gold-silver ratio over 90-1 was in the early days of the pandemic lockdowns.</p>
<p>In the modern era, the gold-silver ratio has averaged between 40-1 and 60-1. When it rises far above that level, it tends to snap back quickly to that mean.</p>
<p>You can see the phenomenon in this cart. Although the ratio has run at a higher average since the U.S. government demonetized silver in 1964, we still see sharp returns to the mean when the gold-silver ratio gets out of whack.</p>
<p style="text-align: right;"><img src="https://www.moneymetals.com/uploads/content/gold-to-silver-ratio-2022-07-27-macrotrends-d788b9b01c7f4661846cad44803e4e1f.jpeg" width="799" height="503" alt="" style="display: block; margin-left: auto; margin-right: auto;" /><em>Chart from Investopedia</em></p>
<p>This typically happens when the price of silver rallies to close the spread. For instance, the gold-silver ratio fell to 30-1 in 2011 after rising to over 80-1 during the money creation of the Great Recession in the wake of the 2008 financial crisis.</p>
<p>In a more recent example of this snap-back, the gold-silver ratio set a record of 123-1 as Covid hysteria gripped the world and then plunged to around 60-1 as central banks around the world cranked up the money creation machine to cope with governments shutting down economies.</p>
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<p>From a historical perspective, when you see gold-silver ratios well above the historical average, it tells you that silver is underpriced compared to gold and there is a strong possibility that silver will go on a bull run to close that gap. Historically, this has often happened in the midst of a gold bull rally, with silver outperforming gold. (Of course, past performance does not guarantee future results.)</p>
<p>Some mainstream analysts are projecting silver will outperform gold in 2025 even as the gold bull market marches forward.</p>
<p>Saxo Bank head of commodity strategy Ole Hansen recently said silver’s dual role as a monetary and industrial metal creates the potential for a strong upside in the coming year with the gold-silver ratio falling into the 70s.</p>
<p>He notes that in 2024, “<em>increased industrial demand helped create physical tightness in the silver market. Sectors such as electronics and renewable energy, particularly photovoltaic (solar) technologies, significantly contributed to this surge.</em>”</p>
<p>Based on preliminary data from the Silver Institute, <a href="https://www.moneymetals.com/news/2024/11/13/industrial-silver-demand-on-pace-to-set-a-new-record-003617">industrial demand set a record in 2024</a>, topping 700 million ounces for the first time. With mine output declining, the market will likely see its fourth consecutive supply deficit.</p>
<p><em>“The expectation of sustained industrial demand is likely to keep silver in a supply deficit into 2025, potentially deepened by a pick-up in ‘paper’ demand through exchange-traded funds</em>," Hansen said.</p>
<p>If Hansen is correct, that would still leave room for further upside in 2026 based on the historical trajectory of the gold-silver ratio.</p>
