Could your investment portfolio benefit from having a silver lining?

Indeed, it’s hard to talk about investing in silver without mentioning gold. Afterall, the prices of both are driven by many of the same factors, such as interest rate expectations, the U.S. dollar outlook and geopolitics. But there’s a key difference that’s been distinguishing the price of silver and its investment viability from gold as of late — demand factors.

Industrial demand for silver is growing at a much more rapid pace than gold. When demand increases, generally so does the price — making silver attractive for investors who are considering precious metals. But why is demand growing? Because silver is essential to the production of solar cells. Therefore, the growth in solar power is driving a significant increase in the demand for silver. In fact, solar demand for silver was up 63% year-over-year in 2023 and is forecasted to keep growing, as global solar capacity continues to develop. Another contributing factor is mining volume. Because the amount of silver mined each year is flat, demand for the metal exceeds the supply. And as mentioned earlier, when the supply of a commodity is low and its demand increases, so too does its price.

So where is the price of silver now and where should investors expect it to go? We can’t understand the attractiveness of investing in silver until we understand its relation to the price of gold — known as the gold to silver ratio, or the gold price divided by the silver price. Despite its recent outperformance and growing demand, the gold to silver ratio currently sits at around 88 to 1 — well above its 10-year average of 79 to 1, from September 4, 2014 to September 4, 2024. This implies the price of silver has room to grow, making it an attractive precious metals investment alternative to gold.

When you factor in the story of silver’s ongoing demand and its likely growth potential, we continue to see a case for a strategic investment portfolio asset allocation in the precious metals. Depending on your investment objectives, this may be the time to give your investment portfolio a silver lining.