Investing.com -- Gold is poised to continue outperforming silver, supported by structural shifts in demand patterns, according to Goldman Sachs.

Strategists at the bank argue that central bank gold purchases—particularly since the freezing of Russian reserves in 2022—have decoupled the two metals, ending a multi-decade pricing correlation.

“The gold-silver price ratio, which historically traded in a 45-80 range, has broken out of this range since 2022,” Lina Thomas and Daan Struyven said in a note. “We don’t expect silver to catch up with the gold rally because higher central bank gold demand has structurally lifted the gold-silver price ratio.”

Gold’s status as a monetary reserve asset has made it increasingly attractive to central banks, while silver’s industrial characteristics have weighed on its relative performance.

The Wall Street giant pointed out that gold is ten times scarcer than silver, 100 times more valuable per troy ounce, and chemically inert, making it more suitable for storage and transport.

In contrast, silver is “more volatile, and less liquid — characteristics that reduce the usefulness as a reserve asset,” the strategists added.

Although China’s solar boom initially provided a tailwind for silver, the recent slowdown in solar production due to oversupply has diminished that support. Meanwhile, ongoing central bank buying is expected to keep gold prices buoyant in 2025, especially amid high U.S. recession risks.

In this backdrop, Goldman reiterated its bullish stance on gold, maintaining a base case of $3,700/toz by year-end and $4,000 by mid-2026.

In the event of a U.S. policy-driven recession, strategists see the potential for gold prices to exceed their bullish base case. The bank estimates gold could reach $3,880 by year-end if ETF inflows accelerate, and in extreme scenarios, prices could climb to $4,500/toz by the end of 2025.

“We believe this is an attractive entry point for long-term gold exposure,” strategists said, citing light speculative positioning and potential for rebuilding.

While a Ukraine-Russia deal could trigger a short-term 3% drop from algorithmic selling, they expect long-term holders to weather such volatility and see any dip as a buying opportunity. However, they caution that near-term fluctuations may be more challenging for tactical or leveraged investors.