China Post Securities: Gold-to-silver ratio urgently needs repair, silver may see 56% upside

China Post Securities released a research report stating that the current gold to silver ratio has reached a high of 93, and if it were to return to around 60, calculated at a gold price of $3400 per ounce, the silver price could reach $57 per ounce, representing a potential 56% increase from the current level. By 2025, global silver supply and demand are expected to be basically balanced, with physical investment demand expected to increase by 7.07% year-on-year, while industrial demand, such as for photovoltaics, remains stable. The firm recommends paying attention to Inner Mongolia Xingye Silver&Tin Mining (000426.SZ) and Shengda Resources (000603.SZ). The main views of China Post Securities are as follows: The fifth gold to silver ratio has reached a historical peak, and the silver price urgently needs to be restored. Silver has financial and industrial attributes, and historically, the prices of gold and silver have shown a positive correlation. Since 1968, the gold to silver ratio has peaked four times, each time rising along with a crisis pushing gold prices rapidly higher, reaching a temporary low for silver prices, followed by government market interventions releasing massive liquidity, leading to a rise in silver prices to complete the restoration. In 2025, Trump's trade wars and market concerns about future global economic recession intensified, with the gold to silver ratio reaching a high of 104. In May, China and the US reached a phase-one framework agreement, restoring recession expectations, bringing the gold to silver ratio back to around 93. Assuming a gold price of $3400 per ounce, the gold to silver ratio would return to around 60, corresponding to a silver price of $57 per ounce, still representing a 56% potential increase from current levels. Silver supply and demand are stable, and physical investment demand may be restored by 2025. Silver is widely distributed, historically maintaining a stable and slightly fluctuating supply. Global silver supply in 2025 is estimated to be 32,100 tons, with a slight increase of 1.52%. Overall, it is difficult to significantly increase silver supply in the short to medium term. In 2022, driven by new energy demand, silver demand reached a peak, but since 2023, total demand has been steadily declining, with a 22% year-on-year decrease in demand for silver coins and bars in 2024, while industrial demand and jewelry demand increased by 3.55% and 2.77% respectively. The World Silver Association predicts global silver demand in 2025 to be 35,716 tons, with a slight decrease of 1.36%, including a +1.12%/-0.99%/-5.96% year-on-year change in demand for electronics/photovoltaics/jewelry, and a 7.07% year-on-year increase in physical investment demand, which may recover due to the restoration of the gold to silver ratio. Risk warning: Silver price fluctuation risk; downstream demand lower than expected risk; domestic and foreign project production progress lower than expected risk; model assumptions do not match reality risk; policy risk higher than expected, etc.