Silver prices surged past $37 per ounce this week, continuing an upward trend that pushed the metal to its highest point since 2012. While gold has still outperformed silver in 2024, with a year-to-date rise of 30% versus 25% for silver—the gap between the two metals is closing fast, driven in part by rising tensions in the Middle East.

Back in early May, Goldman Sachs said gold was likely to outperform silver in the months ahead. That forecast still holds weight, but recent data shows silver catching up. On Thursday, June 19, the gold-silver ratio dropped to 92, down from 105 in April. This ratio reflects how many ounces of silver are needed to buy one ounce of gold. A lower ratio means silver is gaining value relative to gold.

Middle East unrest fuels demand for safe assets

The ongoing conflict between Israel and Iran, marked by cross-border strikes since mid-June, has increased demand for traditional safe-haven assets. Oddly, gold has not seen a major boost. Since late May, its price is up only 3.5%, while silver has jumped 12% over the same period.

“At first sight, gold’s reaction may be surprising, considering the potential consequences of the conflict and also the typical skittishness of the more short-term-oriented traders in the market,” said Carsten Menke, an analyst at Julius Baer. “But a closer look suggests that it is in line with the historical pattern of such geopolitical shocks not lastingly lifting gold prices.”

Silver’s rise is not only about geopolitics. The metal has been facing a supply shortfall since 2021. Last year, silver prices increased more than 20%, compared to around 30% for gold. According to the Silver Institute, the global silver market is expected to post a deficit of 149 million ounces in 2025.

While it remains difficult to predict where the gold-silver ratio will go next, analysts expect further price increases for both metals. Gold’s current pause could pave the way for it to test new highs, with recent projections suggesting a move toward $3,700 or even $4,000 per ounce.

Silver is still far from its 2011 peak of about $50 per ounce. However, Citi sees it reaching $40 within the next twelve months. In a strong rally, prices could climb as high as $46 per ounce by the third quarter of 2025.