After an exceptional year, the risk/return balance has become less favourable for silver, suggesting that it is less likely to outperform gold from here. Yet the current supply shortage is expected to carry on for a while, given a combination of geopolitical factors, supporting silver at a markedly higher price level than in the first half of 2025, but the risk of larger setbacks is rising.
Silver added almost 150% in 2025, outperforming gold
Silver has seen a stellar year-end rally that extended well into the first few weeks of 2026. In 2025, the metal added almost 150%, outperforming gold.
The silver market has been in a structural supply deficit for the past five years. Yet this had not catalysed a major price reaction until 2025, when its upward trend accelerated meaningfully and turned parabolic towards year-end. The steep upward move – which surpassed the absolute price increases preceding the 1980 and 2011 peaks – can be attributed to a combination of several factors.
Falling US rate expectations
In the second half of 2025, the market began to shift its focus to the nomination of Fed Chair Powell’s successor – currently, Kevin Warsh screens as the most likely contender, according to betting odds. The expectation of a more dovish Fed with several rate cuts in 2026 has put the US dollar on a weaker footing and raised the attractiveness of non-interest-bearing investments such as silver and gold.
Addition to the US list of critical minerals
In early November 2025, the US Department of Interior added silver to its list of critical minerals. Owing to its superior electrical conductivity, the material is crucial for the manufacture of high-performance chips and the AI buildout. Its addition to the list, along with fears of potential US tariffs on silver, signalled potential supply risks to the market and led to a front-loading of silver shipments to the US. In consequence, the London market experienced physical outflows, resulting in a shrinking of local silver reserves.
Chinese export restrictions
Since January, China applies stricter controls to silver exports. The decision is part of a broader move to secure critical minerals and only allows government-approved companies to export silver in the 2026/2027 period.
Growing importance as store of value
Lastly, the notion that silver also represents a monetary metal – and hence an alternative to gold – has increasingly gained traction. Compared to other commodities, its cost of storage is low and the metal has a long-standing record as a key material for minting coins. The high per-unit cost of physical gold purchases is effectively excluding more and more lower- to middle-income buyers in EM, such that silver is emerging as a ‘cheaper’ alternative to gold in these markets. In consequence, household demand has picked up both in India and China. In Shanghai, buyers are paying a premium of around US$10 on top of the London per-ounce price.
Gold-to-silver ratio has not yet fallen
Silver’s sharp price surge has brought the gold-to-silver ratio to around 50. Given that the measure has typically fallen to around 40 in past bull runs, silver can climb well above US$100 per troy ounce in the current cycle. In principle, our positive view on gold points to such a move and speculative positions do not seem stretched.
Silver unlikely to outperform gold from here
While the physical supply deficit should support a high silver price level in the near term, we caution that silver usually experiences much larger drawdowns after an extended rally than gold, owing to its higher price volatility. Given momentum is fading, the risk/return balance has become less favourable for silver. This also means that it will be more difficult for silver to outperform gold from here.
By Claudio Wewel, FX strategist at J. Safra Sarasin Sustainable Asset Management
