Welcome to the Deep Dive. Great to be here. So
today we're digging into something a lot of investors
think about. Silver versus gold. How do they
really compare over time? Yeah, it's a classic
question. We're using Doug Young's piece. How
does the performance of silver compare to gold
over time, as our guide? A good starting point.
And the mission today, really boil it down, get
the key insights on how these two medals have
performed historically, what makes them different.
Exactly. Cut through the noise, understand the
core behaviors, and what drives them. OK, so
let's jump right in. Looking at, say, 2000 to
2024, what do the numbers show? Well, the averages.
Gold comes in around 8 % annual growth. Silver's
a bit lower, maybe around 7%. So gold's slightly
ahead on average. On average, yes. But that word
average can hide a lot, can't it? Absolutely.
The journey to those averages seems very different.
Totally different paths. Which brings us straight
to, I think, a fundamental point the article
makes, volatility. Silver just seems to swing
more wildly. It does, generally speaking. Why
is that? Well, gold. It's seen as this, uh...
established safe haven asset, you know, limited
supply, deeply ingrained as a store of value.
Investors often turn to it to preserve wealth
when things feel uncertain. Right, the traditional
anchor. Exactly. So it tends to be, well, more
stable. But silver's got this other dimension,
hasn't it? The article mentions the smaller market
size, sure, but also significant industrial demand.
That's the key differentiator, I think. It's
use in electronics, solar panels, all sorts of
industrial processes. So that demand can really
push the price around. Precisely. When industry
is booming, demand for silver shoots up and the
price can follow pretty rapidly. It's got this
dual personality, precious metal and industrial
commodity. Which creates more potential ups and
downs. Definitely more ups and downs. But interestingly,
sometimes during high inflation or big economic
scares, that same industrial pull can actually
make silver outperform gold, offering potentially
higher returns. But yeah, with more risk. So
those averages, 8 % and 7%, they really do mask
some drama. The article points out some specific
years where silver just exploded. Oh, absolutely.
Like what, 2004 saw a 36 % jump, and 2006 was
nearly 59%. Yeah, huge years. And then you had
2010 and 2011 too, over 37 % and even like 73
% gains. Wow. And even recently, 2024 showing
a strong 26 .5 % gain. Yeah. What tends to drive
those massive spikes? Typically, you see strong
global economic growth, maybe specific tech booms
really kicking in, driving up that industrial
consumption we talked about. It links right back
to that industrial demand factor. Makes sense.
But then there's the other side of the coin,
years where gold did much better or silver actually
lost ground. The article mentions 2001, 2013,
2014, 2018, 2022. Yeah, and those periods, you
often had other factors at play, maybe a stronger
US dollar, which can make commodities more expensive
elsewhere, or slower industrial activity. Sometimes
in really big crises, investors might just pile
into gold as the ultimate safe haven, leaving
silver behind a bit. OK, let's zoom out a little.
The article gives some historical context looking
back before 2000. What does that longer view
tell us? Well, looking way back, gold generally
shows that steadier sort of upward trend over
decades, often tied to inflation, currency worries,
geopolitical stuff, reinforcing its role as a
hedge. The inflation protector, the currency
hedge. Pretty much. And silver's longer story,
more of the same volatility we saw recently.
Yeah, pretty much mirrors it. More pronounced
peaks and troughs through history again because
of that dual role. The article mentions the the
famous silver spike in the 1980s that was a wild
ride wasn't it? It really was and what's interesting
there is you had strong industrial demand yes
but also a lot of speculation laid on top. Ah
speculation. Yeah that really amplified the moves
a classic example of how silver can get caught
up in these big swings often followed by a you
know a correction. It's clearly not just about
the metal itself these external factors. The
economy, interest rates, they play a huge role,
don't they? Absolutely critical. Inflation, for
instance. Rising inflation often boosts interest
in gold. To preserve buying power. Exactly. But
then, if central banks react by hiking interest
rates significantly. That makes holding gold,
which doesn't pay interest, less attractive.
Potentially, yes. Compared to bonds or savings
accounts that start offering higher yields. Silver
fuels these, too. But that industrial demand
adds another layer. Another reaction mechanism.
And then there's the unpredictable stuff. Global
politics, crises, wars. Right. Those often trigger
a flight to safety. Meaning demand for both gold
and silver goes up. Generally, yes. Think back
to the 2008 financial crisis gold surged. Silver
often gets a lift too. But again, how much depends
partly on what's happening with its industrial
demand at the same time. It can complicate the
picture. add to the volatility. Let's dig into
supply and demand a bit more. Sounds like they're
quite different for gold and silver. They are.
Gold supply side is, well, relatively stable.
Comes from mining, some recycling. Demand is
jewelry, investment, and importantly, central
bank buying. Central banks holding gold reserves.
Correct. It creates a fairly predictable balanced
equation which helps with price stability. But
silver's equation is more complex because of
industry. Way more complex. You still have investment
in jewelry demand, but that industrial slice
of the pie is huge, and it's growing. Growing?
Yeah, think about electric vehicles needing silver,
the big push for solar panels, which use a lot
of silver. As these technologies advance and
scale up, that demand can really put pressure
on prices. That's a really important dynamic.
Now, the article spends some time on the gold
-silver ratio. Can you break that down for us?
What is it? Sure. It's actually pretty simple.
It's just how many ounces of silver you need
to buy one single ounce of gold. OK, like a direct
price comparison. Exactly. And it's used as a
kind of indicator of relative value between the
two. How so? Well, if the ratio is really high,
meaning you need a lot of silver ounces to buy
one gold ounce, some analysts might see that
as silver being potentially undervalued compared
to gold. And if the ratio is low? Then the thinking
might be the opposite, that gold looks relatively
cheap compared to silver. Interesting. What's
the historical norm for this ratio? The article
mentions that since the 1970s, the average has
hovered around 65 to 1. So 65 ounces of silver
per ounce of gold. OK, 65 .1 is the benchmark.
So where are we now or where have we been recently?
Well, looking at that 2000 to 2024 period again,
the average was higher, around 71 .9 to 1. A
bit higher than the long term average? A bit
higher, yeah. But what's really jumped out according
to the source, is that since 2022, the ratio
has stayed consistently above 80 to 1. Wow, 80
to 1. That's quite a gap from the historical
65 .1 average. It is. So the implication there,
based on the historical pattern, is that silver
might look relatively inexpensive compared to
gold right now. That's certainly how many analysts
interpret a ratio that's significantly above
its long -term average. It suggests silver could
be trading at a historical discount to gold.
Fascinating tool. OK, wrapping things up, what
does the source suggest about the future outlook?
Well, for gold, the expectation seems to be continued
importance as a core asset. Its price will likely
keep responding to those big economic trends,
central bank moves, global events. And the potential
for inflation might keep demand solid. That's
a key factor in mentioning acting as that inflation
hedge. And for silver, it sounds like its future
is really tied to that industrial side. Very
much so. Its prospects seem heavily linked to
how fast those silver -hungry industries grow.
Technology, renewables, that sort of thing. The
article even hints at potential big movers. It
does, yeah. It mentions a potential stunning
new tech development that could impact silver
prices. And also notes some experts predict a
20 percent surge for silver in 2025. So some
bullish signals tied to that industrial growth.
OK, so pulling it all together. Gold seems like
the more stable traditional safe haven. Generally,
yes. While silver offers maybe higher volatility,
but also potential for quicker growth, especially
if that industrial demand keeps climbing. That
captures the essence, I think. And that gold
-silver ratio being so high right now compared
to history gives an interesting lens on their
current valuation. It definitely does. It highlights
that interplay, economic factors, global events,
supply, demand. But with silver, you always have
that extra industrial dimension really stirring
the pot. This has been really clarifying, digging
into the performance and the personalities of
gold and silver. Glad it was helpful. It leaves
you wondering, though, given those historical
trends, the current high ratio, and all this
talk about future industrial demand for silver,
what would a significant shift back towards that
long -term average ratio actually signal for
investors looking at precious metals? Definitely
something to ponder. Thanks for joining this
deep dive.