When Gold Takes the Backseat, Silver Grabs the Wheel

Authored by Global X Research Team

With gold pulling back after a strong multi-year run, doubts about its ability to deliver further outsized returns are beginning to surface. Certainly, as recession risks fall and U.S. interest rates are likely to stay elevated, could gold’s best days already be behind us?

However, for investors who allocate a fixed portion of their portfolio to alternatives, this new narrative creates a frustrating challenge. Where else can you find a diversifier that offers gold’s rare mix of low correlation to traditional assets and strong price performance?

One possible answer might be silver. The shiny metal has a similar track record of low correlation with equity markets and often trades in step with its more famous counterpart. Yet, despite gold’s recent eye-popping rally, silver has yet to fully participate – suggesting potential room for catch-up.

In this article, we’ll explore whether silver is on the verge of a breakout, the strategies investors can use to maximize the gold-silver relationship, and how investors can utilize both gold and silver exposures to capitalize on their unique advantages.

Investors familiar with precious metals will likely know the  GSR, a relative valuation metric that measures how many ounces of silver one ounce of gold can buy. A higher GSR typically signals one of two things: either gold is overvalued, or – more commonly – that silver is undervalued.

Note: GSR has been calculated using the period from 1972 to the present day. 1972 is generally accepted as the year when open-market gold began trading with sizeable liquidity.

Historically, the GSR has averaged around 60.1 – significant deviations from this level have tended to revert over time. The ratio has rarely climbed above 90, and rarer still is a reading above 100. Since 1972, the GSR has only breached 100 on three occasions: during the 1990s American savings and loan crisis, the 2020 COVID lockdowns, and the current period of tariff uncertainty. It’s clear we are in rarefied territory, but what does it mean for investors?

Quite a lot, it seems.

Note: Past performance is no guarantee of future results.

A long-term analysis of silver returns shows that when the GSR crosses 100, silver averages a staggering 74.2% return over the following 12 months. Even more compelling, the signal has had a 100% success rate across all historical instances.

Admittedly, the sample size for the post-GSR-100 performance is limited. As mentioned previously, there have only been three such periods in history. Even when using rolling daily returns, the dataset expands to just around 50 observations. A more statistically robust indicator, then, may be the average forward 12-month performance of silver when the GSR ranges between 90 and 100, which yields nearly 400 data points. Encouragingly, even this broader range offers a compelling outlook: a 77.75% probability of positive returns, with an average gain of 19.68%.

So, is a silver rally on the horizon? Historical data certainly tilts in that direction. Still, as often stated in the investment industry, “past performance is no guarantee of future results”, and even the most reliable signals eventually lose their edge.

For investors seeking additional context, we’ve also included calculations of the 3-month and 6-month forward returns based on GSR levels, along with their historical probabilities, average wins and average losses, at the end of this article.

With gold having dominated the spotlight in recent months, we believe it may soon be silver’s turn to shine. Certainly, a GSR reading above 100 is a historically rare and powerful signal that has often preceded strong silver rallies. Yet this doesn’t mean gold is out of the picture; in today’s dynamic and uncertain environment, gold can continue to play a vital role in portfolio diversification.

Too often, investors view gold and silver as mutually exclusive choices. In reality, the two metals are deeply interconnected, and each brings distinct advantages to a diversified portfolio. We hope this analysis encourages a more nuanced perspective, one that sees gold and silver not as rivals, but as complementary tools in portfolio construction.

Appendix: Forward 6-Month and Forward 3-Month Performance at Different GSR Levels.

Related ETFS

HUZ – Global X Silver ETF
HUG – Global X Gold ETF
HGY – Global X Gold Yield ETF
GLDX – Global X Gold Producers Index ETF
GLCC – Global X Gold Producer Equity Covered Call ETF
GLCL – Global X Enhanced Gold Producer Equity Covered Call ETF

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Published June 24, 2025