Silver could see further losses against gold as physical market weakens - Metals Focus
Gold and silver continue to struggle in the face of persistent inflation pressures and higher bond yields, but while gold has managed to hold critical support around $4,000 an ounce, silver has fallen to fresh year-to-date lows. According to one research firm, the grey metal could face further selling pressure as weakening investment demand and improving physical market liquidity weigh on prices.
In their latest precious metals report, analysts at Metals Focus said that silver's underperformance has pushed the gold-silver ratio above 76 for the first time since December 2025, up from a range of 60 to 70 through much of the summer.
Although the ratio remains below its 2020-2025 average of 82, the analysts said there is room for it to move higher as silver continues to face significant headwinds. The gold-silver ratio has rallied more than 11% so far this year.
Spot silver last traded at $52.06 an ounce, down more than 3% on the day; at the same time, spot gold last traded at $4,015.60 an ounce, down more than 1% on the day.
The analysts explained that silver's higher volatility relative to gold has amplified the broader selling pressure across precious metals as the ongoing war in Iran drives energy prices higher and fuels inflation concerns.
Although the Federal Reserve left interest rates unchanged Wednesday, it maintained its tightening bias as policymakers remain focused on bringing inflation back to the central bank's 2% target.
According to the CME’s FedWatch Tool, markets are pricing in an 80% chance of a 25-basis-point rate hike in December, followed by at least two additional increases in 2027. The prospect of higher interest rates and rising bond yields continues to raise the opportunity cost of holding non-yielding precious metals.
Between the two precious metals, Metals Focus noted that gold has been better insulated from these headwinds because of its monetary characteristics and continued safe-haven demand.
The analysts said that central bank purchases and long-term investors seeking protection against geopolitical and macroeconomic uncertainty have helped support gold prices. Silver, meanwhile, remains more exposed to industrial demand and speculative investment flows.
Beyond the challenging macroeconomic environment, Metals Focus said that weakening physical market demand is also weighing on silver prices.
The analysts noted that the severe liquidity constraints that helped drive silver to record highs in 2025 and early 2026 have largely disappeared.
They pointed out that by the end of September, silver inventories in London vaults had risen to 932 million ounces, their highest level in nearly four years.
More importantly, available inventories, excluding metal held in physically backed exchange-traded products, have increased to approximately 267 million ounces, nearly double their October 2025 lows.
The increase in available supply comes as investment demand continues to weaken.
According to Metals Focus, global silver-backed exchange-traded products have seen holdings decline by approximately 60 million ounces since the start of the year, releasing previously unavailable metal back into the physical market.
The analysts said that while initial outflows reflected profit-taking after silver reached record highs, a lack of investor conviction has prevented meaningful new investment.
Speculative interest has also weakened significantly. The report noted that net managed money long positions in CME silver futures have fallen to just 17 million ounces, their lowest level since February 2024.
Physical bullion demand has provided little support.
According to the firm's survey of leading mints, primary silver bullion coin sales plunged more than 80% in the second quarter compared with the first three months of the year, falling to their lowest quarterly level since the survey began in 2010.
Although sales recovered modestly in the third quarter, they remained 22% below year-earlier levels.
Looking ahead, the research firm expects silver's physical market fundamentals to remain weak as elevated prices weigh on jewellery and silverware consumption.
At the same time, industrial demand is facing growing pressure as manufacturers reduce silver usage or substitute other materials, particularly in the photovoltaic sector.
As a result, Metals Focus expects the global silver market deficit to narrow further this year before shifting into a surplus in 2027.
The changing supply-and-demand outlook suggests that silver is unlikely to experience another significant physical market squeeze in the near term.
Despite the bearish outlook, Metals Focus does not expect silver's underperformance against gold to last indefinitely.
The analysts said that silver will likely continue taking its direction from gold over the next 12 months, with higher interest rates and bond yields creating further downside risks in the near term.
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