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Investing in silver: How bright does this precious metal really shine?

In the shadow of gold, silver prices have made an impressive sprint this year. Portfolio manager Cyrill Staubli analyzes the drivers behind this rally and explains the role silver can play in a portfolio. He also advises a balanced approach.

Author: Cyrill Staubli

Anlegen in Silber - ein Silberbarren
Investing in silver: Since the beginning of the year, the price has climbed by about 70% (image: istockphoto.com).

The three key take­aways for inves­ting in silver in a port­folio con­text:

  1. The rapid price surge in silver is driven by several factors, including a structurally tight supply.
  2. Silver can play a significant role in a portfolio. However, a balanced approach is essential when investing
  3. In our view, there is a good chance that silver prices will continue to develop positively.

Currently, the eyes of most market participants may be firmly fixed on the soaring gold price. Yet, in the shadow of the yellow metal, silver has also embarked on an impressive ascent (see chart below): Since the beginning of the year, the price per ounce in USD has climbed by about 70% and is now trading at just under its all-time high from 2011. What has triggered this enormous value gain?

Rapid rise in silver prices (in USD per ounce)

Source: Bloomberg / Zürcher Kantonalbank, legal notices regarding the chart below

We identify several reasons (see also chart below) for the recent rally in silver prices:

  • Industrial demand: The solar industry in particular requires increasing amounts of silver for photovoltaic cells. But demand is also rising in electronics and e-mobility. In our opinion, silver is one of the critical raw materials for electrification and the energy transition, as we have already detailed in an in-depth analysis.
  • Limited supply: The silver market has been in a structural deficit for some time. Specifically, the development of new mines is progressing slowly, while demand could increase further due to the spread of new technologies, such as electric vehicles. At the same time, stockpiles have been reduced in recent years. This leads to a situation where more silver is needed annually than is produced.
  • US currency and interest rates: A weaker USD and anticipated interest rate cuts by the US Federal Reserve (Fed) support the price of interest-free silver, which is traded in USD.
  • Turbulent geopolitics: Investors are seeking safe havens during the currently uncertain geopolitical times. Traditionally, gold benefits in such scenarios; however, silver often follows suit, sometimes with additional momentum.
  • Renewed investment interest: The strong rise in gold prices has pulled silver along, as many investors view silver as a "cheaper" alternative to the yellow metal.

What drives silver demand? (Usage in %)

Source: World Silver Survey 2025 / Zürcher Kantonalbank

A precious metal with a dual character

Silver has been a sought-after precious metal for thousands of years, whether as a means of payment, jewelry, or industrial raw material. Unlike gold, silver has a dual character: on the one hand, it serves as a store of value, and on the other, it is an impor­tant raw material for industry, technology, and the energy transition (e.g., solar modules). It is precisely this dual function that often makes the price of silver more volatile, but also more pro­mising than that of gold.

This investor interest is not misleading: In fact, silver can play a significant role in a portfolio. The key takeaway right at the outset: In our view, gold remains the strategic precious metal, while silver is the tactical "booster investment." Why do we come to this conclusion?

Investing in silver with caution

Silver can offer additional return opportunities during periods of rising inflation or geopolitical uncertainty. During the inflationary years between 1977 and 1979, silver outperformed gold by over 250%1. Even in 2022, when the world was confronted with high inflation rates, the silver price repeatedly showed its strength (see chart below).

Gold-silver ratio in focus (number of ounces of silver needed to buy one ounce of gold)

Source: Zürcher Kantonalbank

Due to its higher volatility, investors should use silver cautiously and not consider it as a foundational hedge. The average volatility of silver prices is 29%, compared to 16%2  for gold. In the long term, gold also offers better diversification in a mixed portfolio. For example, the correlation of gold prices to the US stock market index S&P 500 is 0.04, while the correlation of silver to the S&P 500 is 0.233  (see table below).

How do silver and gold correlate with stocks and bonds?

 

Silver

Gold

S&P 500

BBG Global Aggregate

Silver

– –

0.77

0.23

0.35

Gold

0.77

– –

0.04

0.44

S&P 500

0.23

0.04

– –

0.06

BBG Global Aggregate

0.35

0.44

0.06

– –

Source: Bloomberg / S&P / Zürcher Kantonalbank, legal notices regarding the chart below

Outlook and conclusion: Where is the silver price headed?

From our perspective, there is a good chance that the silver price will continue to develop positively. This is supported by the fact that investor interest appears to remain high. This is especially true as silver, compared to gold, is still relatively "cheaply" valued. The structural de-dollarization trend, which also weakens the USD, also seems likely to persist in our view.

Finally, the structural deficit in silver is also likely to remain in place for the time being. This is a trend that is ironically exacerbated by investor demand, as evidenced by the rising silver holdings in exchange-traded funds (ETFs).

Another demand driver: Rising holdings in silver ETFs (in million ounces)

Source: Bloomberg / Zürcher Kantonalbank, legal notices regarding the chart below

1Data Range: 12/31/1976 – 12/31/1979; Return in USD
2Data Range: 08/31/2000 – 08/31/2025; Weekly Data; Annualized
3Data Range: 08/31/2000 – 08/31/2025; Weekly Data

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