All that glitters is not gold alone

Can the amazing rally in gold and silver continue next year? The former has grabbed significant traction as a safe haven in 2025, reaching record highs. Geopolitical instability, central bank purchases, a falling US dollar and growing fiscal uncertainty have seen the yellow metal reach $4,300 per ounce, a rise of 68% in the past 12 months alone.

The outlook remains bullish, with the likes of JP Morgan estimating that physical gold could reach $5,000 per ounce by this time next year. However, it is the white metal that has been catching my eye. Silver returns have comfortably outstripped gold in 2025, returning 125% to investors.

Often referred to as “gold on steroids” because of its volatility, silver has hit a couple of major milestones in the past few weeks. In October 2025, the silver price reached an all-time high of $54.48 per ounce, breaking a 45-year high of $49.45. It now stands at $66 per ounce and shows no signs of slowing down any time soon. The gold/silver ratio now stands at 70, a year-to-date low, from a peak of 105 around Liberation Day, suggesting increasing institutional investor confidence in silver.

The rise is due to a number of factors, such as supply and industrial deficits. The World Silver Survey shows the global silver market running consecutive deficits in the past five years as demand has outpaced mine production and recycling, both of which tend to be quite inelastic. A new report released recently by the Silver Institute argues that the industrial demand growth - photovoltaic, electronics, electic vehicless and artificial intelligence/data centres - is structural in nature and that it now accounts for 65% of annual demand and rising. There is a structural shortage, with demand rising 4% in 2024 to 680.5 million ounces, reaching a record high for the fourth consecutive year.

There seems to be strong momentum in the price of both metals from here, especially in an environment where the US Fed is cutting rates, which is also encouraging more speculative behaviour, as evidenced by inflows to exchange-traded funds (ETFs). Figures from early December show more money flowing into silver-backed ETFs than in any single week since July. In short, there are strong fundamentals to support silver at $66 per ounce. All this is prior to the retail market getting involved to any significant degree, while the likes of India and China are only going to increase their demand from here.

Then there are the silver miners; profitability has been rising as metal prices rise, but they are still at attractive valuations. WS Amati Strategic Metals co-manager Georges Lequime currently has 18% of his fund in silver. He says, unlike previous cycles, where silver equities typically traded at premiums of more than 100% at cyclical highs in the market, most of the silver equities are currently trading at a 50-70% discount to net asset value.

Lequime says the market does not believe in the sustainability of the recent rally and has priced both metals’ equities accordingly, something, he says, could be incorrect.

He says: “To date in Q4, the silver price has averaged 29% higher than the silver price received for producers in Q3, while the gold price is 17% higher. Spot silver and gold prices are currently 50% and 20% respectively, higher than the Q3 average. This suggests that the silver producers will report extremely strong financial results for Q4 when they report in late January and February, which should drive share prices higher.”

Jupiter Gold and Silver manager Ned Naylor-Leyland says mainstream investors have yet to participate in this recent rally to the degree they have done previously. Bullion exchange-traded fund holdings are below the peak levels reached in 2020 (gold) and 2021 (silver). He believes this is an oversight, particularly in the case of silver.

Some would argue that both metals are in bubble territory. I recently spoke with Credo Dynamic co-manager Benjamin Newton, who argues that the long-term risk does not support the buyer of silver in this territory. He says: “Our general view is that when everything becomes mainstream, it might be time to look elsewhere, rather than chase at this point. The argument is fair that silver is used in the likes of industrials and chip makers, but they are largely cyclical in nature. Ultimately, if something moves that quickly, there is an element of speculation behind it, as people jump onto the bandwagon.”

To back silver from here, you have to accept that we may be in a new paradigm when it comes to evaluating the value of precious metals. The price tells you it is historically expensive, but demand outweighs supply (something which is unlikely to change given the need for silver as an industrial metal), while falling rates and deglobalisation also support price fundamentals from here.

I do believe we will see a slowdown in these prices at some point – but that should not deter long-term investors given those fundamentals. Silver will still be volatile, but it may be a little bit more trustworthy in the future.