Silver prices have recently set consecutive record highs, driving the gold-to-silver ratio down to 50, its lowest level since March 2012. However, commodity analysts at BMO Capital Markets caution that shifts in the supply-demand landscape may indicate the current trend in the ratio is unsustainable. The firm noted in a research report, "While geopolitical uncertainty and demand as a 'meme investment' could push the gold-silver ratio even lower in the near term, we forecast that the physical silver market surplus will gradually widen, which is bound to drive the ratio higher over the coming years, continuing the long-term trend seen since the 1970s."
Analysts further elaborated, "Since the end of the Bretton Woods system in the 1970s, there has been a significant causal relationship between the physical silver supply-demand surplus and the gold-silver ratio. Periods of severe supply surplus have typically been accompanied by a steady rise in the ratio, and vice-versa."
Although investment demand has been the primary driver of this silver rally, BMO emphasizes, "The more critical metric to watch is the balance between silver consumption (industrial + jewelry + silverware) and supply (which is usually higher than consumption)."
The firm specifically advised investors to monitor silver demand from the solar sector, suggesting that photovoltaic silver usage may have already peaked. It also noted that until solid-state batteries achieve commercialization, silver supply will continue to grow, leading to its underperformance relative to gold.
Boosted by weaker-than-expected US weekly jobless data that strengthened the dollar, gold futures edged lower on Thursday. However, the silver front-month contract managed to close higher after declining for most of the session. Robert Yawger, an analyst at Mizuho Securities, pointed out in a report, "Stabilization in the Iran situation did not trigger a cooling of safe-haven sentiment that would weigh on silver prices, and despite the US announcement of no new tariffs on critical minerals including silver, silver still pushed higher stubbornly."
Specific market data showed that the January-delivery gold front-month contract on the COMEX retreated from its record high set in the previous session, closing down 0.2% at $4,616.30 per ounce. In contrast, the silver front-month contract climbed for a fifth consecutive trading day, closing up 1.1% at $91.876 per ounce, highlighting a divergent performance within the precious metals sector.
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