Gold-Silver Ratio Falls Below 55: What Shift in Investor Sentiment Reveals About Precious Metal Prices and Portfolio Strategy

Gold-Silver Ratio Sees Sharp Swings Amid Volatility in Precious Metals

The gold-silver ratio has witnessed significant fluctuations this year, with the ratio slipping below the key 55 mark on Thursday, 14 May, indicating silver's recent outperformance against gold. This decline comes after the government raised effective import duties on both metals to 15% from 6%, in an effort to combat a widening import bill and geopolitical pressure stemming from the West Asia crisis.

World Gold Council data suggests that each 1% duty increase reduces consumer gold demand by roughly 6.4 tonnes, meaning the cumulative 9-percentage-point increase could suppress annual demand by approximately 57 tonnes. The steeper duty structure also risks reigniting gold smuggling activity, which had declined meaningfully following the 2024 duty cut, according to Renisha Chainani, Head - Research at Augmont.

Gold and Silver prices in India declined today on profit booking after the precious metals jumped over 6% each in the previous session on the import duty hike on precious metals. Silver prices on MCX fell 1.9% to ₹2,94,450 per kg, while gold prices fell 0.7% to ₹1,61,027 per 10 grams.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Gold-Silver Ratio History

The gold-silver ratio rose to over 62 in April as silver prices staged a sharp rally in the previous month, while gold continued to trade near record highs, prompting investors to reassess which precious metal currently offers better investment potential. Earlier this year, the ratio had dropped below 44 in late January as silver prices rallied strongly. However, a subsequent correction in silver pushed the ratio above 70 during February.

Tata Mutual Fund noted that the ratio had shown a strong recovery last month by moving above 62, signalling gold's outperformance over silver. "The expectation is that the ratio to rise back towards 68 level, mostly due to rise in gold demand amid geopolitical tension," predicted the fund house.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

What is Gold-Silver Ratio?

The gold-silver ratio measures how many ounces of silver are required to purchase one ounce of gold. A rising ratio indicates that gold is outperforming silver, while a falling ratio suggests silver is gaining strength relative to gold. Historically, a ratio above 80 is viewed as silver being relatively undervalued, while levels closer to 50 indicate stronger silver outperformance.

Gold vs Silver: Which Precious Metal Should You Buy?

Tata Mutual Fund maintained a bullish long-term outlook on gold despite expecting some near-term consolidation in prices. "We expect gold prices to consolidate in the near term, amid mixed macro signals — 'higher for longer' US rates, a stronger dollar, and elevated bond yields. Short-term volatility of around ±5% is likely," Tata Mutual Fund said.

The fund house also pointed to potential policy friction between the US administration and the Federal Reserve as a factor that could weaken the US dollar and provide an incremental tailwind to gold prices in the near term. On silver, Tata Mutual Fund said prices could fluctuate alongside industrial metals amid concerns over global demand and slowing economic growth.