Silver is no substitute for gold

Investors interested in a gold allocation often ask: Why not silver instead? Colloquially referred to as the “poor man’s gold,” many allocators consider the white metal to be a cheaper alternative to the yellow metal. But that could be a mistake.

We don’t dispute the merits of silver investments or historical periods of silver performance. There is always a time and place for a tactical asset allocation. However, it’s important to differentiate between the two precious metals from both a financial and fundamental perspective.

Five factors to consider when comparing gold and silver

Gold and silver are not interchangeable assets because:

1. Gold is a low-price volatility asset compared to silver. Over the past 40 years, weekly data show gold prices have exhibited lower realized volatility versus US equities by 1.3 vol points, on average. This contrasts sharply with silver, which has seen its mean price volatility realize 10 vol points higher versus US equities.¹

2. Silver has a propensity for larger and more frequent drawdowns. Quarterly returns data over the past 40 years show 18 episodes when silver prices were corrected by at least 10% versus only four such periods for gold. Additionally, the max quarterly drawdown for silver at 30.9% was greater than gold’s 22.7%.²

Of course, past performance is not a reliable indicator of future performance. But we find this multi-decade window all the more remarkable considering average quarterly returns for both metals were nearly identical over this period, at 1.8% for silver and 1.7% for gold.³ Bullion’s price resiliency compared to silver is likely a knock-on impact of its lower volatility and stronger liquidity profile versus silver.

3. Silver returns are more correlated to US equities compared to gold. Investors usually seek precious metals investment for diversification benefits. But over the long term, static and rolling correlations show gold prices are a random walk with equities, while silver has demonstrated a much stronger positive relationship.⁴ That may be a result of silver behaving more like a “base metal,” with a pro-cyclical tilt (see point 5 below).

4. Central banks buy gold, not silver. Official sector demand for physical gold should help to lift its price floor and dampen downside volatility. It also embeds gold in the global monetary system. Indeed, in 2024, gold surpassed the euro as the number two reserve asset held by the official sector.⁵

Central bank purchases of gold are usually driven by strategic or geoeconomic considerations—such as de-dollarization or reducing credit risk by holding a physical asset—as opposed to short-term gains. The shift out in the gold demand curve since the Global Financial Crisis has been meaningful in this regard, with central bank gold demand growing from 10%-15% of primary mine supply in 2010 to 25%-30% from 2022-2024.⁶

Silver is not held by central banks and has no such large-scale buyer.

5. Silver demand is tied to industrial activity, while gold demand is much more counter cyclical. Industrial demand share of total silver demand has been over 50% over the past decade, with the industrial share jumping nearly 10 percentage points from 2016 to 59% in 2025.7 This is a sharp contrast to gold, which sees its fabrication demand for industrial uses at 7.5% of total demand in the past decade and trending down since 2016.⁸

While many investors view gold and silver as “financial assets” it’s important to remember they are first and foremost physical commodities. Silver consumption skews toward industrial use, making it inherently more exposed to industrial production, PMIs, and pro-cyclical growth narratives.

The unique financial and physical profiles of gold versus silver underscore that when considering investing in gold for defensive, strategic, or even tactical reasons, silver is no substitute!