Investing.com -- Silver may be setting up for a breakout, according to Sevens Report’s Tom Essaye, who highlights a rare divergence between gold and silver pricing that could soon correct in favor of the latter.
While gold continues to dominate headlines with new record highs above $3,000 an ounce, silver has quietly posted a 16% gain year-to-date. Yet, relative to gold’s 25% surge, it appears undervalued.
“The Gold-to-Silver Ratio (GSR) is a simple and compelling measure with historical significance. It tells you how many ounces of silver it takes to buy one ounce of gold. Today, that number is around 100:1,” Essaye said in a Thursday report.
“Typically, it runs between 40:1 and 60:1, and it doesn’t get above 100 very often,” he added.
Historically, such stretched ratios have been followed by silver outperformance as the metals revert to their long-term pricing relationship.
Silver’s appeal extends beyond technical signals. Unlike gold, which is driven primarily by monetary and geopolitical fears, silver carries dual demand from both investors and industry.
Essaye emphasizes that silver is increasingly seen as the “people’s gold,” while also benefiting from strong industrial drivers.
Demand is growing “due to electric vehicles, which use more silver than traditional cars.” Moreover, Essaye highlights solar panels, one of the fastest-growing sources of silver demand, electronics, 5G technology, medical devices, and defense systems.
Even with these tailwinds, silver prices have yet to revisit their 2011 highs near $50. “Silver hasn’t even returned close to its all-time high of $49.95 during this current precious metals’ bull run,” Essaye said.
“Right now, silver is still ~35% below its historical peak. Meanwhile, gold is regularly breaking price records,” he added.
Essaye also suggests that silver’s lag is partly behavioral. In times of uncertainty, institutions typically move into gold first. “Silver tends to lag and then play catch-up. If history repeats, the second leg of the metals rally will eventually belong to silver.”
For investors, the Sevens Report recommends monitoring the GSR for further dislocation, reallocating from overweight gold positions into silver, or establishing a smaller satellite exposure.
Among ETFs, the iShares Silver Trust (NYSE:SLV) and abrdn Physical Silver Shares ETF (NYSE:SIVR) are highlighted as leading options.
Lastly, Essaye points out that in silver bull markets, mining stocks often outperform the metal itself.
The Global X Silver Miners ETF (NYSE:SIL) focuses on larger, senior miners, while the Amplify Junior Silver Miners ETF (NYSE:SILJ) targets smaller, more volatile junior miners. SILJ tends to offer higher risk and potential reward, which investors should consider when allocating.