Gold outperformed the S&P 500 in the 1970s and the first decade of the century. In the 1970s, it effectively protected investors from inflation; at the beginning of this century, it helped investors cope with the general economic downturn from the bursting of the Internet bubble to the financial crisis.

As prices soar, gold may repeat the feat again. Gold has returned 113% over the past decade (i.e. 2020-present), while the S&P 500, including dividends, has returned 78%.

However, investors may feel a little uneasy if they are preparing to invest in gold in large quantities now.After all, it has already broken through multiple entire thresholds, how much can it increase in the future? Gold hit an all-time high of $3,500 per ounce this week, but fell back after President Trump's stance on trade and the Fed softened. However, gold has still risen by about 41% in the past 12 months.

Fortunately,History shows that silver may follow closely.Silver has risen about 23% over the past year, and despite not performing as well as gold, it is still far ahead of the S&P 500’s 6% return over the period.

This is likely to be related to Silver's "dual character". As a precious metal, it has a hedging attraction similar to gold, promising to maintain its value in situations such as inflation, war, and social unrest. But it also has more industrial uses than gold, such as electronics and solar panels, making it more economically sensitive. So, when the market starts to worry about a recession, gold is usually more expressive at first than silver, and silver is expected to keep up later.

Hard asset enthusiasts like to focus on the ratio of gold to silver prices (gold-silver ratio) to assess whether gold has overheated. As of Wednesday, gold was 98 times the price of silver, more than 100 times earlier this week. And the average ratio over the past 30 years is 68. The only time that there was a more imbalance was in the early stages of the COVID-19 pandemic in early March 2020.At that time, the gold-silver ratio reached 113. In the 12 months since then, silver prices rose 73%, while gold rose only 8%.

It is worth noting that even during the financial crisis, the gold-silver ratio did not exceed 100, but only rose sharply from 53 in June 2008 to 80 in November. But this change was still accompanied by strong performance in silver that year, and silver rose 81% in the following 12 months, while gold rose 44%.

In the less-remembered market panic in early 2016, the gold-silver ratio also exceeded 80. Similarly, the subsequent performance of silver exceeded expectations at that time.

This time, what factors may break this pattern?A truly disastrous global trade situation may bring about changes because silver is more economically sensitive.But even the recession triggered by the global financial crisis ended before June 2009, allowing silver holders to benefit from the Federal Reserve's monetary easing and enjoy the cyclical rebound in industrial demand.

So far, why does silver still lag behind gold? Commerzbank analysts said in a report that the fact that silver cannot keep up with gold can be explained by the importance of industrial demand.Industrial demand is growing at a lower rate than previously expected.

"The stagnation of industrial demand and a decline in demand for gold jewelry and silverware is expected to cause a total silver demand to fall by 1.4% to 1.15 billion ounces," the bank also believes that a slight increase in demand for silver bars and coins will not prevent overall demand from falling.

However, Deutsche Bank added that silver would perform better if it compared the price performance of crude oil, copper, U.S. stocks or U.S. bonds. To fight the worst, gold is still better than silver. At the same time, history shows thatIt may be time for investors to introduce a new precious metal friend into their portfolio while retaining their old friend gold.