Gold or silver: What should you buy?
Gold or silver: What should you buy now? How do you decide?
The gold-silver ratio offers one way to judge which metal makes a better investment bet at any point in time; here's how you do it
Gold and silver have delivered massive gains over the past five years, leaving Indian investors with a key question: which metal should they buy now? One indicator — the gold-silver ratio — may offer a useful way to compare the two.
Gold has risen from about ₹41,700 per 10 grams in 2021 to around ₹1.62 lakh today, a gain of roughly 289%. Silver has performed even better in percentage terms, climbing from around ₹55,200 per kg to ₹2.60 lakh, a rise of about 371%.
For investors choosing between the two, the gold-silver ratio measures how many ounces of silver are needed to match the price of one ounce of gold. A ratio of 70, for instance, means 70 ounces of silver are worth roughly the same as one ounce of gold.
Reading the ratio
The ratio currently stands at around 67. A high ratio generally means silver is relatively cheap compared with gold, while a low ratio suggests silver has become relatively expensive.
The rule of thumb is straightforward: investors may consider silver when the ratio is high because silver could have room to catch up, pulling the ratio lower. When the ratio is low, gold may be the preferred option. The AI-generated image below captures the idea.
Historically, the gold-silver ratio has moved between roughly 50 and 90. Bullion experts put its long-term average at around 70, with a margin of about 5%. That makes the current level of just under 67 relatively balanced, with neither metal offering a clear signal based on the ratio alone.
Demand matters
That is where supply and demand become important. One argument is that silver still has room to catch up, supported by industrial demand from renewable energy, electronics and manufacturing.
On the other hand, Colin Shah, Managing Director of Kama Jewellery, believes gold can continue to rise despite short-term corrections.
Gold demand in India also typically rises during the festive season, with September to November potentially becoming important months for the metal's next move.
Bigger picture
Beyond supply and demand, investors also need to watch the broader Indian economy and geopolitical developments, including the Iran war and Russia-Ukraine war.
US interest-rate decisions could also influence precious metals, particularly if the US economy slows. The performance of the dollar globally is another important factor. Gold's appeal in countries such as India and China also goes beyond investment. Its emotional value and reputation as a safe-haven store of value remain important factors for households.
The balance, perhaps, lies in not treating gold and silver as substitutes. Instead, investors could consider owning both in the right proportion.
A 70:30 or 80:20 allocation tilted towards gold is generally considered an option, although the appropriate mix ultimately depends on an investor's risk appetite. The key difference is volatility. Gold tends to be more stable over the long term, while silver can offer greater upside but also comes with larger swings in both directions.
Long-term approach
Gold and silver should remain only a small part of an overall portfolio alongside stocks, mutual funds, fixed deposits and other assets.
And because bullion prices do not move in a straight line, investors who choose to buy should consider a longer investment horizon of at least three to five years rather than focusing on day-to-day price movements.
With the gold-silver ratio sitting near 67, the message is less about choosing one metal over the other and more about getting the allocation right.
(The content above is for information only, and does not constitute investment advice.)
