Silver’s reluctant, sluggish participation in early 2016’s powerful gold rally has been glaringly obvious. Instead of amplifying the yellow metal’s big gains as in the past, silver largely failed to even keep pace. The lack of silver confirmation for gold’s big move has certainly raised concerns. But despite silver’s vexing torpidity in recent months, it is a coiled spring ready to explode higher to catch and surpass gold.

Silver has always been something of an investing enigma, somehow combining attributes of a highly-speculative investment, a conventional industrial commodity, and an alternative currency. Silver trades like each from time to time, stymieing attempts to classify it. Silver tends to grind sideways boringly for long periods of time, and then skyrocket higher in bulls of such magnitude that they are celebrated for years.

Silver’s primary driver has always been the price of gold. While silver can decouple over the short term, these two precious metals have very-high correlations across most multi-year spans. This is the result of silver’s unique supply-and-demand profile. Silver’s industrial demand, including all fabrication, jewelry, and silverware, accounts for around 4/5ths of total global demand. This tends to be fairly constant over time.

Thus the relatively-static lion’s share of silver demand has little impact on its price. But while investing is responsible for just the other 1/5th, it varies wildly depending on sentiment. So it effectively sets silver’s price at the margin. And the overwhelmingly-dominant driver of how bullish or bearish investors feel about silver is the price of gold. Silver effectively acts like a gold sentiment gauge, mirroring gold’s action.

When gold is climbing decisively and investors believe its rally is sustainable, they tend to flock back to silver. And since silver is such a tiny market in capital terms, relatively-small inflows can drive utterly massive price surges. 2014’s total world demand of 1067m ounces per the Silver Institute was worth just $20.3b at 2014 average silver prices. That’s practically a rounding error compared to the global capital markets!

The World Gold Council pegged global gold demand at 4226.4 metric tons in 2014. At the average gold price that year, that was worth $172.0b. So with the world silver market being less than 1/8th the size of the world gold market, all investor silver buying and selling has a price impact on the order of 8x what it would in gold. So silver can easily move disproportionately far and fast once gold gets investors excited again.

The problem is 2016’s powerful gold rally hasn’t translated into enough investor excitement to generate a substantial bid for silver. As of mid-March, silver was only up 12.5% year-to-date compared to 19.9% for gold. Normally during big gold bull runs, silver amplifies gold’s upside since its market is so much smaller. Silver can generally be expected to double gold’s underlying gains over time, a far cry from 2016’s action.

So what does silver’s serious early-year underperformance mean? Some argue that the lack of silver confirmation for gold’s strong surge is a warning sign that the latter isn’t sustainable. But that is extremely unlikely given gold’s strong fundamental underpinning of massive new investment buying.  Far more likely is silver is just lagging gold, which isn’t uncommon as this secular gold and silver chart shows.

While gold is absolutely silver’s primary driver mathematically, this critical relationship gets delayed after secular gold-price extremes. That’s because the gold/silver link isn’t mechanical, but psychological. It takes time for major gold trend reversals to sink in with silver investors. They don’t ramp their buying and selling to outsized silver-moving levels until they really believe that gold’s new trend is well-established.

This delayed silver reaction to major new gold uptrends is readily evident over the past decade or so. During gold corrections and bear markets, silver amplifies gold’s downside to ultimately fall considerably farther. That leaves silver sentiment very bearish when gold is bottoming. So recently-burned investors are loath to return in gold’s initial rally.  Their outlook tainted by fear and despair, they doubt gold’s run will last.

But once gold rallies far enough for long enough to convince silver investors that the bottom really is in, and the new upleg is sustainable, they start redeploying in silver. This is slow at first, but as silver’s own price is driven higher more and more capital returns. Nothing begets buying like buying, everyone loves a winner. Then as silver’s gains accelerate, they soon catch up with and eventually surpass gold’s own.