Silver up 200% in 12 months but Gold regains favour as volatility rises

Despite strong prices, global silver ETFs have seen outflows of over 3 million ounces since the start of 2026

 For much of the past year, silver stole the spotlight.

 

Motilal Oswal Financial Services Ltd. (MOFSL), in its latest Commodities Insight report titled ‘Gold’en Ratio Reset’, highlights that silver has delivered an exceptional rally of over 200% in the last 12 months, sharply outperforming gold’s 80% rise—making silver one of the strongest-performing assets globally.

 

 The rally dramatically altered the long-standing relationship between the two metals. The gold–silver ratio — a simple measure of relative value — compressed from pandemic-era extremes of around 127 to near 50 by the start of 2026. Historically, the ratio tends to average closer to 70, suggesting silver’s catch-up phase has largely played out.

 

MOFSL notes that this sharp outperformance has led to a significant compression in the gold–silver ratio, which has fallen from pandemic highs of 127 to around 50 at the start of 2026. This reset suggests that while the long-term outlook for precious metals remains constructive, the near-term risk-reward equation may now be shifting in favour of gold after silver’s outsized run.

 

“Silver has delivered sharp outperformance in a short span, and with the gold–silver ratio now near lower levels, the near-term risk-reward is turning more favourable for gold. While we remain positive on both metals and silver continues to have long-term upside backed by industrial demand and tight physical market conditions, the recent rally has also increased near-term volatility. In this phase, a higher allocation to gold can help manage fluctuations while staying invested in precious metals," said Navneet Damani, Head of Research Commodities and Manav Modi, Commodities Analyst, Motilal Oswal Financial Services Ltd.

 

Why MOFSL is Recommending a Rebalance

 

Despite strong prices, global silver exchange-traded funds have seen net outflows this year. Gold ETFs, in contrast, continue to attract steady inflows — a sign that investors are gradually moving away from higher-volatility trades toward safer havens as global uncertainty rises 

 

That uncertainty is hard to miss. Geopolitical tensions, delayed effects of tariffs, and concerns around fiscal stress have coincided with a surge in global liquidity. The US money supply remains near $22 trillion, while China’s M2 has crossed ¥340 trillion, growing at over 8% year-on-year. Excess liquidity tends to lift asset prices — but it also increases volatility, sharpening the appeal of defensive assets.

 

Silver, by nature, is more volatile. Its price swings have widened significantly over the past year, reflecting both tight physical supply and speculative excess. Gold, meanwhile, has moved in a steadier trend, offering lower beta and better downside protection during periods of stress.

 

This divergence is now showing up in technical and valuation signals. The gold–silver ratio sits near historically low levels that have often proved unsustainable. Previous instances have been followed by a phase of mean reversion — typically through relative outperformance of gold rather than a sharp decline in silver.

 

Importantly, this does not mark the end of silver’s story. Structural supply constraints and industrial demand continue to support its long-term outlook. But after a sharp and rapid run-up, the near-term risk–reward balance appears less favourable.

 

MOFSL emphasises that the view is not a negative call on silver, but a risk-managed reallocation strategy after an aggressive up move. The report highlights that silver has become more volatile with sharper price swings, while gold continues to offer relatively better stability—making it a preferred near-term hedge in uncertain market conditions.

 

The report also notes that after capturing a major move—from ₹60,000 to ₹3,20,000—a phase of consolidation or rebalancing by market participants becomes more likely at elevated levels.

 

Flows & Macro Trends Add Support to Gold

 

MOFSL points out that despite strong price action, global silver ETFs have seen outflows of over 3 million ounces since the start of 2026, while gold ETFs have witnessed comparatively steadier inflows.

 

The report adds that a supportive macro backdrop is emerging as global liquidity expands.  

 

Physical Tightness Remains, But Silver’s Near-Term Trade Looks Crowded

 

MOFSL notes that physical tightness in silver continues, with Shanghai trading at $10–11 above COMEX and MCX maintaining a premium of over 10%, reflecting inventory pressure in the system. However, given how sharply prices have already moved, the report indicates that gold may now offer a more balanced entry point for investors seeking stability.

 

Portfolio Allocation Shift

 

As part of its scenario-based analysis, MOFS outlines a rebalancing strategy aimed at improving stability and risk-adjusted returns within precious metals portfolios. 

 

Under this framework, the suggested allocation tilts toward gold, with a 75% allocation to gold and 25% to silver

 

This indicates a preference for gold as a relatively steadier hedge in the current environment, while still retaining meaningful exposure to silver’s long-term structural upside. 

 

MOFSL notes that after silver’s sharp outperformance and heightened volatility, such a rebalancing approach can help investors manage fluctuations more effectively, without exiting the precious metals theme. 

 

"Going forward, we believe investors can benefit from a rebalanced precious metals strategy—retaining silver as a long-term structural theme, while increasing gold allocation to manage near-term volatility and capture a potentially stronger risk-adjusted opportunity in the next phase of the cycle," said  Navneet Damani, Head – Research (Commodities) and Manav Modi, Commodities Analyst (Bullions), Motilal Oswal Financial Services Ltd.