Why silver is riskier than gold, according to Goldman Sachs

Core Insights - Silver has significantly outperformed gold in 2023, with a 70% increase compared to gold's 50% rise [1][7] - Both metals reached record prices, with silver hitting $51.38 per ounce and gold around $4,060 per ounce, driven by expectations of Federal Reserve rate cuts and safe-haven demand [1][2] Market Dynamics - The recent surge in precious metals was exacerbated by President Trump's announcement of a 100% tariff on imports from China, which intensified market volatility [2] - Goldman Sachs analysts caution that while silver may continue to gain in the medium term due to anticipated Fed rate cuts, it faces more volatility and downside risk compared to gold [2][3] Historical Context - Historically, silver and gold prices have moved together, but this relationship has changed due to increased central-bank buying of gold, which has pushed its price higher [4] - Silver's price is more cyclical due to its industrial applications, making it less reliable as a hedge compared to gold [4] Institutional Perspective - Silver lacks the institutional support that gold has, as it is not recognized under IMF reserve frameworks and has minimal presence in central bank portfolios [5] - Central banks do not seek cheaper substitutes for gold; they manage value rather than weight, holding fewer ounces to maintain dollar value [6] Practical Considerations - Gold's physical characteristics make it a more practical reserve asset, being ten times scarcer than silver, 80 times more valuable per ounce, and twice as dense [6] - The smaller market size and absence of a central-bank safety net contribute to silver's higher volatility compared to gold [7]