Silver Shines: Investors Ditch Gold for 'Poor Man's Gold'

After making a fortune in safe-haven gold trades, gold bulls are now turning en masse to silver — with the “poor man’s gold” being bet on as the next big thing in the precious metals market. In the past three months, silver ETFs have surged by about 18%, far outpacing the modest 4% return of gold ETFs, as speculators ditch overvalued gold and rush into silver. On Monday, spot silver hit $39 an ounce, a new high since September 2011, with year-to-date gains expanding to 35%.

Triggers for Silver's Surge

The trigger for silver's surge was U.S. President Trump's announcement of a new tariff policy: starting August 1, a 35% tariff will be levied on Canadian imports and a general tariff of 15%-20% on most other trading partners, sparking safe-haven demand. “The question now isn’t whether to hold silver... but how much to hold,” said Apurva Sheth, head of market views and research at SAMCO Securities. The comment highlights the urgent sentiment of silver bulls.

Gold Bulls Exit, Silver Price Target at $50

Silver's explosive rise coincides with veteran gold investors beginning to retreat. Previously bullish on Indian gold prices at 30,000 rupees, targeting 50,000 rupees, Motilal Oswal Financial Services called it quits earlier this month. “We’ve witnessed gains exceeding 30%, and past 25-year data shows that the New York Mercantile Exchange (Comex) gold has never seen annual gains exceeding 32%,” the brokerage noted, adding, “The high price is showing market fatigue.” Gautam Shah of Goldilocks Premium Research, who accompanied gold from $1,800 to $3,500, cleared his gold positions last month. “Gold’s positive factors have mostly been priced in, and it’s entering a long-term consolidation phase, and this trend will continue,” Shah said. “But we've been extremely bullish on silver over the past few months.” His confidence in silver is striking: “Looking at a 12-15 month cycle, silver’s medium-term target is $43, and in the long run, it may even touch $50.”

Why Speculators Prefer Silver

Speculators likely favor silver because the gold-to-silver ratio is too high (silver is undervalued) and silver is expected to catch up with gold's recent gains. In addition, silver's supply and demand fundamentals are strong – the global market is facing a shortage for the fifth consecutive year. Supply-side risks add more volatility to silver's bullish trend. Sheth warned that “If silver is in insufficient supply, and if the U.S. or other countries impose similar tariffs on silver, silver prices could soar to astronomical levels.”

Investment Demand for Silver Surges

The Silver Institute indicates that silver has become one of the most attractive investment assets in 2025, with inflows into exchange-traded products (ETPs) tracking silver surpassing the entire past year. Data from the institute shows that net inflows into silver ETPs reached 95 million ounces in the first half of 2025, with global total holdings rising to 1.13 billion ounces, just 7% below the peak of 1.21 billion ounces in February 2021. Driven by rising silver prices, the total value of ETP holdings repeatedly hit new records in June, surpassing $40 billion for the first time. Nearly half of the annual increase was concentrated in June alone, when silver soared to a 13-year high, bringing year-to-date gains to 25% at month's end. The Silver Institute pointed out that June 2025 was the month with the most significant monthly gains since the “Reddit silver squeeze” event in early 2021 (when the price neared $30 an ounce). The institute stated that futures trading also shows strong recognition of silver's store-of-value properties. Data shows that as of June 24, silver net long positions on the Chicago Mercantile Exchange (CME) surged 163% from the end of 2024, and average net long positions were at their highest level since the first half of 2021. However, retail investment trends in silver show regional variations. In Europe, despite a recovery in the past year and a half, retail investment volume (by volume) remains below the high levels of 2020-2022. Demand in India remains strong, growing by 7% year-on-year in the first half of 2025. As for the United States, retail investor redemptions remain high, coupled with weak new purchases, severely dragging down sales of silver coins and silver bars. The institute stated that overall U.S. retail demand is expected to decline by at least 30% this year. Looking ahead, the research institute believes that silver coin and silver bar markets “may see strong two-way trading in the coming months,” but demand for newly minted products may remain weak. However, one uncertainty is: how will investors react if silver prices surpass $40 an ounce? The report noted that “the market may be divided – with some taking profits and others entering due to expectations of further increases.”

Macro Environment Favors Precious Metals

The overall macro environment for precious metals is favorable. Data from Emkay Wealth Management shows that the U.S. dollar index has fallen by about 10% since the start of the year. “This has been reflected in international gold prices, but we need to see the dollar weaken further due to official interest rate cuts and falling market yields,” the company stated. Emkay pointed to two key factors driving precious metals: the direction of U.S. interest rates and the expected decline in the dollar. “Considering the current economic conditions and low inflation, there is a high probability that the Federal Reserve will cut interest rates once or twice before the end of the year.” However, new budget spending of $4.6 trillion may complicate matters. “The resulting borrowing could push up yields, making the situation more confusing,” Emkay warned. For now, silver seems to be the preferred precious metal for investors seeking the next big thing. As Shah said: “If you've taken profits on gold, this might be a good time to increase your positions in silver. The super-trend of this commodity seems to be taking shape.” For investors, the question is no longer whether to hold precious metals, but which one will deliver higher returns in the coming months.