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The gold-silver ratio returns to equilibrium… Luke’s case for silver melting… Eric’s case for gold… Financial turmoil fuels the long-term bet… So, what are you buying?
In the horse race between gold and silver, which metal will come out on top – and which metal should you bet on now?
For more than two years, we have urged digest Readers to own both gold and silver.
But as relative value changes, we also become clear about which metal should be leading at different points in the cycle.
To combat these shifts, we frequently reference the gold-to-silver ratio – a long-term measure of the relative value between the two metals that has historically reverted to the mean, although its baseline has changed over time.
- In the twentieth century, it averaged about 47:1
- From 2000 to 2020, it averaged closer to 60:1
In the first half of 2025, fear and preference for gold pushed the ratio above 105 – near the peak of the coronavirus panic. At that point, silver was undervalued compared to gold.
When the ratio started to decline, we flagged an asymmetric uptrend for silver. In our July 25 digestWe wrote:
We do not expect a meaningful decline in the price of gold beyond normal profit taking and healthy “two steps forward, one step back” market movement.
Therefore, if the gold/silver ratio continues to normalize to the most recent average of around 60, it will be up to silver to do the heavy lifting – meaning silver price gains should exceed gold’s gains.
This is exactly what we expect.
Certainly, between July 25th digest On January 15, gold rose 37%, but silver rose 137%.
I mention January 15 because it was when we updated our analysis and forecast
In our January 15 digestWe have argued that after silver’s strong rally, it is time to bet on gold for outperformance:
The explosive movement of silver has dramatically reset the gold-silver ratio. It stabilizes at around 51, its lowest level since 2012.
In practical terms, this means that silver has gone from undervalued to relatively expensive versus gold in a very short period.
From here, history says that gold is likely to outperform silver as the ratio moves toward equilibrium, which we peg in the mid to upper 50s, with 58 to 60 as a reasonable medium-term target.
As you can see below, that’s exactly what happened.
While gold managed to gain 2%, silver fell 17% with the gold-to-silver ratio back to where it was as I wrote – roughly 61.
So, where should you put your money now?
As the gold-silver ratio returns to balance, there will no longer be a lopsided imbalance that tips the odds squarely in one camp.
However, said our technology expert Luke Lango Innovation investor Silver is looking for a sharp move higher for one main reason…
Its crucial role in introducing artificial intelligence.
Silver is one of the most overlooked heroes in the AI story.
It’s not just a precious metal; It is our best natural conductor of electricity. This makes them indispensable for the wiring, switches and contacts inside data centers where AI models are trained, as well as for the chips that run those models.
As the scope of AI increases, so does the demand for components that can transfer massive amounts of power and data at lightning speeds — and silver’s conductivity makes it irreplaceable in those applications.
So, are you optimistic about AI? You are also bullish on silver.
Now, in Luke Innovation investor Daily notes from earlier this week explained how Van Eck Semiconductor Corporation (Name it) has served as a very good proxy for overall global economic strength and AI-driven demand over the past two and a half years.
Here he explains the relationship:
When SMH rises, global economic strength and demand improve, so silver (offensive precious metal with lots of AI applications) outperforms gold (defensive precious metal with limited AI applications).
When SMH declines, the strength of the global economy and demand weakens, so silver underperforms.
Locke points out that while semiconductors have seen a massive rally over the past few weeks, silver has underperformed.
Here’s what it looks like: SMH is up 24% so far in April, while silver is up just 3.5%.
Back to Luke:
This means that silver is set to see massive short-term melting over the next few weeks.
Meanwhile, silver will likely continue to rise amid all this positive news regarding AI infrastructure building and finance, so silver should continue to rise over the next few quarters.
The setup for silver looks very attractive in the short and long term.
For Luke’s latest analysis, plus his specific silver and AI picks, Click here to learn more about joining Innovation investor.
But you don’t want to overlook gold, either
While Luke is bullish on silver, our macro investing expert, Eric Fry Fry investment reportHe believes that gold has a lot of upside ahead.
Nearly a year ago, Eric made an official bullish case for gold and gold stocks. To illustrate, he borrowed a line from respected financial writer James Grant:
Gold is betting on monetary chaos, but also on other types of chaos, including financial, geopolitical, and presidential turmoil.
Since then, Eric’s bet has doubled the returns of the S&P 500 over the same period. That’s not bad for a “bet on chaos.”
But with gold still falling sharply from its all-time high in January, Eric poses the natural follow-up question…
Is it time to take profits and walk away or add to your gold bet?
Here’s Eric:
I recommend the latter option, simply because the four disturbances identified by Grant have not dissipated.
If anything, they have become more erratic over the past year.
Eric believes that the single most underappreciated – and most important – disruption is financial disruption.
Financial turmoil is a elegant term for government deficits and sky-high debt. When a nation’s finances get out of control and its creditors decline, that nation loses a significant portion of its freedom, self-determination, and power.
The debt crisis quickly turns into a currency crisis, and a currency crisis can destroy the entire economic foundation.
The United States is not yet on the threshold of a currency crisis, but it is headed toward the kind of financial turmoil that could put sustained downward pressure on the value of the dollar.
The stories about our government’s financial turmoil never end
As we summarized in digest Last month, the US national debt reached $39 trillion – and it is growing by about $1 trillion every quarter.
This number alone is striking. But the most important story is what happens around it.
Last week, the International Monetary Fund issued a warning that should have received more attention than it did:
The increase in the supply of US Treasuries reduces the safety premiums that US Treasuries have traditionally commanded – an erosion that is pushing up borrowing costs globally.
In simple words: The most trusted financial instrument in the world is losing its position as the most trusted financial instrument in the world.
It gets worse…
The International Monetary Fund also found that the international “comfort yield” on Treasuries – the premium investors pay for the liquidity and “safety” of US Treasuries – has now turned negative.
From the report:
Treasuries now offer a higher yield than their synthetic dollar equivalents of G10 hedged sovereign bonds.
In other words, investors aren’t paying for security anymore. They demand compensation for the risks.
And it doesn’t stop there…
Also last week, Henry Paulson, Treasury Secretary under the George W. Bush administration, issued a stark warning.
according to luckPaulson believes the country’s debt problem is beginning to erode long-held confidence in Treasuries — and may eventually lead to a collapse in demand.
Here’s Paulson:
We need to have a targeted, short-term glass-breaking emergency plan on the shelf, ready to go when we hit the wall.
The former Treasury Secretary is not saying that this crisis is on our doorstep, but he warns that when it arrives, “it will be fierce.”
Back to Eric as we refocus on gold’s role in all of this:
Growing American indebtedness – and the declining appetite of foreign creditors to finance it – provides an abundance of raw materials for the “bet on gold” to continue to pay off.
That’s why we continue to hold many positions in our company Fry investment report A portfolio that provides exposure to the gold market.
The financial predicament facing the United States government does not constitute a crisis today. But this is a slow calculation, becoming harder to ignore, and more costly to postpone.
For investors looking to act on Eric’s analysis, he’s compiled a list of three gold stocks he currently recommends — including one he considers the least risky entry point for investors who want to increase their exposure to the precious metal at current levels. You can find its full details here.
To come full circle, what is the business step of our portfolio – gold or silver?
The case for having both is strong.
Gold is a bet on chaos.
Silver is a bet on artificial intelligence.
Silver may rise faster in the short term as it plays catch-up to SMH as Locke pointed out… but gold’s long term gains remain massive due to our government’s fiscal excesses.
So, which one wins?
both of them.
Invest accordingly.
Before we sign…
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I wish you a good evening,
Jeff Remsburg
