Why Relative Value is Key to Understanding Precious Metals

At a Glance

• Silver, platinum and palladium have significantly outpaced gold over the past 13 months
• Enormous global budget deficits, persistent above-target inflation and widespread central bank interest rate cuts are fueling a flight to precious metals

A volatile start to the year for precious metals has reinforced an important lesson from the end of 2025: it’s no longer solely about gold. While the yellow metal has risen to over $4,500 an ounce – an 83% increase since January 2025 – its peers, silver, platinum and palladium, are no longer just following in its wake; they are beginning to significantly outshine it. 
Despite a recent correction, over the past 13 months, gold has been significantly outpaced: Platinum is up 127%, palladium over 86% and silver nearly 158% as of midday London time on February 5.

Macroeconomic Currents Steering Investor Sentiment

So, what is fueling this significant demand for precious metals? Investors are increasingly looking for alternatives to traditional fiat currencies, driven by the convergence of three key macroeconomic factors:

• Enormous Budget Deficits: Every major economy around the world – from the U.S. (its 6% of GDP deficit is high, especially alongside historically low unemployment) to China, Brazil, France, the UK, Germany and Japan – is grappling with substantial fiscal imbalances.
• Stubbornly High Inflation: Inflation continues to run above target in almost all major economies, with only a few exceptions like China, Singapore and Switzerland.
• Widespread Rate Cuts: In a striking paradox, almost every central bank globally (with exceptions in Brazil and Japan) has cut interest rates over the last year, despite inflation being above target and, in many instances, rising.

Unlocking Relative Value: Beyond Gold’s Dominion

Initially, these conditions created a tremendous appetite for gold. However, as gold continued its multi-year rally, its trading ratios moved far beyond historical standards relative to silver, platinum and palladium. This created a compelling “bargain hunting” scenario. Investors began to diversify beyond gold, realizing that silver, platinum and palladium – by historical metrics – were trading at incredibly low ratios compared to gold.
A critical factor in the outsized moves of these other metals lies in their market size. Gold’s mining supply last year was valued at around $460 billion. Silver, by contrast, was only $66 billion – about one-sixth or one-seventh the size of the gold market. Even smaller, platinum and palladium combined accounted for only around $12 billion to $13 billion, roughly 1/32nd the size of the gold market. As investors began to diversify beyond gold, these smaller markets experienced enormous and accelerated price movements.

The intrinsic value of these precious metals is rooted in their limited supply. Gold, for instance, sees about 100 million ounces mined annually. Silver’s production is eight times higher at over 800 million ounces, yet its price is about 1/50th that of gold, suggesting it could still be perceived as undervalued relative to its supply. Platinum and palladium are even scarcer, with just 6 million ounces of each mined annually – only 6% of gold’s supply. This highly concentrated production, primarily from South Africa, Russia and Zimbabwe, makes them highly sensitive to supply or demand shifts.

Closing the Ratio Gap

Silver’s recent performance clearly illustrates this relative value shift. A few years ago, one ounce of gold bought over 100 ounces of silver; more recently, it was around 80 ounces. As of mid-January, that figure was below 50 ounces of silver per ounce of gold. While silver has not yet reached its historic high of approximately 25 ounces of silver per ounce of gold, it has certainly made enormous strides in that direction, making the argument that “silver is still cheap” harder to sustain compared to previous years.

Platinum stands out as a compelling, if temperamental, opportunity. For years, its use in diesel engine catalytic converters declined, causing its price to lag. However, with an exceptionally tiny mining supply – just 6% of gold’s and less than 1% of silver’s – platinum is highly responsive to renewed interest. If investor or industrial demand for jewelry or other applications grows, platinum’s price, having only recently surpassed its 2007 peak, could see further gains.

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Originally Posted February 5, 2026 – Why Relative Value is Key to Understanding Precious Metals