The price of silver has skyrocketed by over 200% in the past year, changing the gold/silver ratio. This raises the question of whether this increase signals a market shift and if now is the time to sell. The gold/silver ratio—how many ounces of silver you can buy with an ounce of gold—has dropped significantly from its peak in April 2025, even though gold’s price has risen by nearly a third.

Speculative Excess in Silver Market

Silver is unlikely to become a new safe-haven asset. Instead, its price rise seems driven by momentum as it tries to keep pace with gold, along with growing retail interest and industrial demand. With a 200% year-on-year increase, we see signs of excessive speculation in the silver market. This price rally appears to be fueled by momentum and retail interest, rather than a shift toward becoming a safe-haven asset. The risk of a sharp price drop in the coming weeks is significant. The gold/silver ratio has decreased from its peak in April 2025 to an unusually low level near 40. Historically, this ratio has averaged about 60. Such low levels often precede times when silver underperforms compared to gold. A strategy could involve going long on gold and short on silver futures to benefit from the ratio returning to its historical average.

Market Dynamics and Technical Indicators

We are noticing signs of excess in the derivatives market. Call option volume for silver ETFs has surged by over 300% in the last quarter. Traders might consider buying put options to bet on a price decline with limited risk. Another strategy could involve selling out-of-the-money call spreads to profit from high implied volatility while maintaining a bearish to neutral outlook. Technically, silver is highly overbought, with the weekly Relative Strength Index (RSI) above 85. We’ve seen similar readings before major price corrections, like in 2011, which suggests that the upward momentum may be running out. Traders should be cautious about entering new long positions. While long-term industrial demand for silver—especially in solar and electric vehicle production—is strong, it doesn’t justify the rapid price rise we’ve seen. The main driver has been investment demand, which can be volatile and change quickly. We should monitor outflows from silver-backed ETFs as a potential early warning for a trend reversal. Create your live VT Markets account and start trading now.

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