Quants Corner | For gold and silver, is it different this time?

Over the centuries, gold and silver have been talked about as if they are interchangeable, appearing in the same sentences when precious metals are being discussed.

The current decade has seen a great deal of discussion about precious metals and their historic role in times of geopolitical uncertainty, high inflation and loss of faith in fiat currencies. With most of the major developed markets running large fiscal deficits, Russia’s attack on Ukraine triggering the biggest conflict in Europe since World War II, the Covid-19 pandemic and disruptions in the Strait of Hormuz contributing to inflationary shocks, and shifting patterns of global trade, this created a climate favoring precious metals.

A cursory look at price action for gold and silver, and at the flows into the dedicated gold and silver funds tracked by EPFR, suggests that the two metals still largely march to the beat of the same drum. But a range of factors, including the rise of high frequency retail trading platforms, supply constraints impacting silver and its role in hardware underpinning electronic and technology applications, growing acceptance of cryptocurrencies, and large-scale buying of gold by central banks, suggests that these assumptions should be tested.

In this Quant’s Corner, we examine the highs and lows experienced by these precious metals over the past six and a half years. Building on that, we analyze the relationship between physical gold and silver and ask if they should be viewed as separate assets, underpinned by unique sources of demand and different drivers of valuation. 

A price picture painted in bold strokes

The current decade has been marked by the price of both gold and silver hitting multiple record highs. The price of gold has continually broken records since the COVID-19 pandemic, surpassing $3,000 per troy oz in early 2025 and reaching a high of over $5,400 per troy oz in January of 2026. Its price has remained high, fluctuating between $4,000-$5,000 per troy oz over the last five months.

Silver, too, has seen its price hit new records. In January of 2026, it reached $118.45 per troy oz, a 489.9% increase from its 10-year average between 2015 and 2025. Along the way, its price surged in late 2020 and early 2021 as retail investors tried to force institutional holders of the metal to close short positions.

The record prices seen in 1Q26 didn’t last, with gold’s price falling by 24.3% from its peak. However, compared to gold, silver exhibited far greater volatility. From its peak price on January 29 to July 1, the price of silver declined by 50.8%.

In basic supply and demand terms, global gold production totals an estimated 3,700 metric tonnes, with China, Russia, Australia, the US and Canada ranking among the world’s five biggest producers. When combined with recycling of existing gold, supply and demand are roughly in balance at 5,000 tonnes annually. That is not true of silver, with Mexico, China, Peru, Bolivia and Poland the biggest contributors to the 25,000 tonnes produced annually. But annual demand currently exceeds production and recycling by over 1,500 tonnes.

Gold and silver shine in different domains

Gold has long been seen as a safe investment with a long history as a widely accepted instrument of exchange. As a physical commodity, it is traded in every major market. The supply of gold grows annually and does not rely on a company staying solvent or a government honoring debt, unlike stocks and bonds. Gold withstands the trials of inflation, maintaining its purchasing power as the value of cash erodes. It is liquid and politically neutral, meaning that reserves cannot be sanctioned in the way that foreign currency reserves can. During moments of uncertainty, gold gains traction.  

Silver is both a monetary and industrial metal. As the most electrically and thermally conductive element, it’s used in a wide range of products such as photovoltaic solar panel cells, circuit boards, semiconductors, and switches. Over half the annual demand for silver comes from industrial users compared to 13% for gold.

EPFR data shows that the current total net assets held by Gold Funds are $642 billion versus $108 billion for silver. Historical fund data reveals that gold has long commanded a structurally larger base, as shown by the table below. Gold being a larger asset class could be due to its primary investors.

In part, this difference between physical gold and silver holdings lies in their investor bases. Demand for gold in recent years has been increasingly driven by institutional investors who command large capital bases and, in the case of central banks, are arguably somewhat price insensitive. 

Meanwhile silver, with its lower price point, is more accessible to retail investors working with smaller levels of capital. Those retail investors are more sentiment-driven and often cause outsized effects on silver’s price. The metal saw institutional interest fall and retail interest increase between 1Q22 and 1Q25, as shown in the chart below, offering an explanation behind its volatility, as momentum-driven retail flows have caused prices to rally harder and fall further.

Adding to silver’s volatility is the fact industrial demand increasingly comes from ‘growth’ industries such as semiconductors, EV batteries, and electronics that have volatile trajectories. Furthermore, as previously mentioned, the new supply of silver is not keeping pace with demand. This makes silver a less appealing commodity for institutional investors interested in a stable portfolio.

A central bank ‘put’ for gold?

In contrast to silver, gold has interest from both investor bases. Retail and institutional flows move together, but institutions lead by a significant margin. This supports gold’s role as a reliable store of value for investors seeking to avoid large drawdowns.

Also supporting gold prices are the purchases of the metal by central banks for strategic reserve purposes. Responding to the weaponization of the US dollar and its debasement by continuous fiscal deficits, purchases by these large, price insensitive buyers hit 1,000 tonnes annually between 2022 and 2024 before dropping to 850 tonnes last year.

In 2022, following Russia’s high-profile assault on Ukraine, the US and its allies placed sanctions on around $300 billion worth of Russian reserves. The international prevalence of the dollar meant Russia’s central bank was cut off from a substantial portion of the global economy. The newly exposed vulnerabilities of the dollar prompted greater diversification from central banks, especially in emerging market countries like China, Poland, Turkey and India.

This trend was exemplified by China’s central bank. Starting in 2020, the People’s Bank of China reduced its US Treasury holdings while increasing its gold reserves, with a strong inverse correlation of -0.935.

Analysis of data from another ISI brand, macroeconomic data provider CEIC, highlights that gold is on the brink of surpassing US Treasuries as a share of global reserve portfolios.

Mutual funds and ETFs taking rather than setting prices

The increased central bank appetite for gold did not trigger a strong response from investors. As seen in EPFR fund flow data from April 2022 until May 2024, cumulative flows into physical gold funds fell, and were negative again between March and July of this year.

When flows turned positive, they did so as the US Federal Reserve lowered its policy rate from 4.25%–4.50% to 3.50%–3.75%. That strengthened gold’s appeal relative to yield-bearing assets. The opportunity cost of remaining uninvested grew, offering an explanation as to why the majority of flows came after prices had risen. Fund providers responded to the renewed interest by opening a significant number of new funds that increased the total tracked by EPFR from 250 to 304.

Like gold, silver has seen a change in sentiment. Cumulative flows were negative from June 2022 to June 2025 before turning positive with an average monthly inflow equal to 0.02% of current AUM. However, this lagged the average monthly price growth of 5.1%. When silver’s price crashed by 50.8% between the 29th of January and 1st of July, fund flows moved very little, suggesting that both the rally and crash were driven largely outside of ETFs and mutual funds, likely due to industrial demand rather than fund participation.

Two birds of not quite the same feather

Though physical gold and silver prices often move together, their recent volatility has shown that the forces behind the demand – or lack of it – for them are distinct and quite different.

Gold’s strength lies in its depth, liquidity, and central bank endorsement. It is likely to retain its role as the safety net of a portfolio even through downturns. Silver offers exposure to consistent industrial demand, but its smaller, retail-driven market makes it far more volatile. Its path through 2026 has demonstrated that silver rallies harder and falls further when sentiment reverses.

For investors, the practical distinction between the two is one of horizon and purpose. Gold has proven to be well-suited as a long-term defensive allocation while silver behaves more like a tactical trade, rewarding those who can time its price waves.

Going forward, it is important to keep in mind that gold and silver might share price patterns but not price drivers. That is the key to predicting where each metal may, from an investment perspective, go from here.