Silver Prices Experience Bull Run, Gold-Silver Ratio Corrects

Recently, silver prices have embarked on an upward trend, attracting market attention. As precious metals, silver and gold prices exhibit a high degree of correlation, generally moving in tandem. However, silver prices tend to be more volatile. Since the beginning of the year, gold prices have continued to rise, repeatedly hitting new historical highs, while silver price gains have lagged relatively. As of June 9, the year-to-date gain for the most-traded SHFE gold contract was 23%, while that for the most-traded SHFE silver contract was 18%, with silver futures prices trailing gold futures prices by 5 percentage points. The gold-silver ratio once exceeded 100.

Against the backdrop of the US significantly increasing tariffs and rising risks of a global economic slowdown, the rationale for gold price strength is stronger than that for silver. Unlike gold, silver possesses both financial and industrial attributes, with over half of silver demand stemming from industrial uses. Therefore, gold's safe-haven attribute is stronger than silver's, and safe-haven funds favour gold more. However, recently, as gold price gains have slowed and entered a period of consolidation, silver prices have embarked on a rapid upswing, with the gold-silver ratio showing a notable correction.

Some market participants believe that the US government may implement trade protection measures on other key metals, such as silver, thereby boosting market demand for silver as a safe-haven and substitute asset, and driving up silver prices. Amid a cooling of global economic "recession trades" and a persistently high gold-silver ratio, silver prices have initiated an upward trend. Driven by multiple factors, including a tight silver fundamental landscape, a shift in financial markets from "recession trades" to "reflation trades," and continuous capital inflows, the upside potential for silver prices has opened up.

Silver's industrial demand continues to grow, while supply remains stagnant. Data from the Silver Institute indicates that since the beginning of the year, silver demand in the PV sector has surged, yet total supply has changed little, with a persistent supply-demand gap. In 2024, global total silver demand was 1,164.1 million ounces, total supply was 1,015.1 million ounces, and the supply-demand gap was 148.9 million ounces. It is projected that in 2025, global total silver demand will be 1,148.3 million ounces, total supply will be 1,030.6 million ounces, and the supply-demand gap will be 117.6 million ounces. The supply-demand fundamental landscape for silver remains tight.

The cooling of global safe-haven sentiment is the primary reason for the current silver price rally. On April 2, US President Trump signed an executive order announcing the implementation of a "reciprocal tariff" policy on global trading partners, escalating global trade frictions. The market worried that under the weight of tariffs, the risk of a deep global economic slowdown would rise, negatively impacting silver's industrial demand and causing silver prices to fall sharply alongside non-ferrous metals. After June, despite ongoing uncertainties in the global trade landscape, the market gradually realized that Trump would not dare to be unyielding at the risk of a US slowdown. US economic data showed that while manufacturing PMI, consumer confidence index, and other data continued to pull back, labor market indicators such as the US unemployment rate and non-farm payrolls remained robust. The US economy is slowing down, but the current risk of a deep slowdown is relatively small. Therefore, global safe-haven sentiment has cooled, and risk assets such as US stocks and non-ferrous metals have rebounded significantly. For gold, the most favourable macro environment is "recession," while silver prefers a "stagflation" macro environment. If global macro trades shift from "recession" to "stagflation," it will be more conducive to silver price gains.

Since May, the silver holdings of SLV, the world's largest silver ETF, have continued to increase, and CFTC non-commercial net long positions have climbed, indicating strong bullish sentiment among speculative funds towards silver prices. During the same period, gold ETF holdings and CFTC non-commercial net long positions have changed little. The ETF and futures open interest data have shown good synchronization with silver price trends, suggesting that speculative funds are an important driver of the current silver price rally.

Based on historical patterns of the gold-silver ratio, there is still room for the ratio to correct downward. Since 2010, the fluctuation range of the gold-silver ratio has remained within the 40-80 interval. In extreme cases, such as the COVID-19 pandemic in 2020, which plunged the global economy into a deep slowdown risk and a liquidity crisis, the gold-silver ratio once exceeded 120 in March 2020, but subsequently corrected to below 80 with the rapid rise in silver prices. In April 2025, gold price gains outpaced silver, and the gold-silver ratio remained above 100. Although some view the gold-silver ratio as no longer having reference value, the cooling of "recession trades" is conducive to the correction of the gold-silver ratio, which currently stands at 92. If the US Fed cuts interest rates in a timely manner, the risk of a global economic slowdown declines, and the main theme of financial markets shifts to "reflation trades," the gold-silver ratio is expected to further correct to its historical normal level below 80. Therefore, "deglobalization" and "de-dollarization" have highlighted gold's allocation and safe-haven value, with the risk of a sharp decline in gold prices being small. Judging from the current gold-silver ratio, the upside potential for silver prices is greater.

From a technical perspective, SHFE silver prices once faced significant resistance at the 8,500 yuan/kg level. With the strong price rally, SHFE silver prices have now formed an effective breakout. Currently, major moving averages are trending upward, and the MACD has formed a golden cross, indicating that SHFE silver is in a typical bullish trend.

Therefore, a tight supply-demand landscape, cooling global financial market safe-haven sentiment, inflows of speculative funds, the correction of the gold-silver ratio, and technical resonance have jointly driven the recent strong rally in silver prices.

Looking ahead, if the main theme of macro trades shifts from "recession trades" to "reflation trades," there is still room for the currently high gold-silver ratio to correct, and the upside potential for silver prices has opened up.

With the transformation of the demand structure, silver's safe-haven and monetary attributes have weakened, while its industrial attribute has strengthened. Currently, the global trade landscape remains highly uncertain, with the possibility of tariff rates fluctuating. Compared to gold, silver has a smaller market size, greater volatility, and poorer trend following, making trading more challenging.

Please note that this news is sourced from https://www.cnmn.com.cn/ShowNews1.aspx?id=462467 and translated by SMM.