Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Why Silver Is Getting Crushed While Gold Holds Up
Transcript
- Lucas: Silver is getting absolutely crushed this week, and gold is barely flinching. We are looking at silver at $73.62 an ounce, down 3 percent in five days. Gold, by contrast, is at $4,419 — off only 2.3 percent from recent highs. That gap is worth talking about because it tells you something about where the money is flowing and what the market is actually worried about. Luna: And it's not just a this-week thing. Silver has been underperforming gold for a while now. The gold to silver ratio is sitting above 60 again, which is pretty elevated by historical standards. Lucas: Right. Normally when investors get nervous about inflation or geopolitical risk, both metals rally together. Silver might move more because it's a smaller, more volatile market, but they generally track. This divergence — gold holding up, silver sliding — suggests something more specific is going on with silver's other identity. Luna: Its industrial identity. Silver is a monetary metal, sure, but roughly half of annual demand comes from industrial uses — solar panels, electronics, soldering, batteries. And that part of the story seems to be cracking. Lucas: Exactly. And look, I think this is a good moment to acknowledge something. If walking through the economy with us has made something click for you, honestly, if today was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. No pressure at all. It's what keeps this thing ad-free and independent. Luna: Yeah, it really does. And we're grateful for every person who's done that. It makes a difference. Lucas: So back to silver. The industrial demand picture has softened noticeably in the last few weeks. You're seeing slower orders from solar manufacturers in China and Europe, and the electronics supply chain is still working through inventory. That hits silver directly. Luna: And analysts are already warning about demand destruction. I saw a note this morning saying silver could fall further if industrial buyers keep pulling back. They're not saying it's a crash, but the tone is cautious. Lucas: Right. Meanwhile gold is getting support from a different place. The Fed's Kashkari was on CNBC this morning saying inflation fight takes priority, labor market is in decent shape. That's basically a 'we're not cutting rates anytime soon' message. Gold usually dislikes higher rates, but in this environment it's still finding a bid because of geopolitical fear. Luna: You've got the Iran situation heating up again, fresh US strikes, Kuwait activating air defenses. That's the kind of news that keeps gold bid even when rates are high. Silver doesn't get the same safe-haven premium because it's seen as more industrial. Lucas: And that's the key distinction. Gold is almost pure monetary asset at this point. Silver is a hybrid. When the economy looks shaky, gold benefits from fear, but silver gets hit on the industrial side. That's exactly what we're seeing play out. Luna: So is this a buying opportunity for silver, or is the sell-off justified? Lucas: That depends on your time horizon. If you believe industrial demand rebounds later this year — maybe solar picks up again, maybe electronics restock — then silver at $73 looks cheap relative to gold at $4,419. The ratio above 60 historically has been a level where silver eventually catches up. Luna: But you could also argue the ratio stays elevated if the economy slows more than expected. Silver would be a leveraged play on growth, and right now growth expectations are getting shaved down. Lucas: Exactly. The last time the ratio was this high was during the early pandemic, when industrial demand collapsed. Silver eventually rallied hard after that, but it took a catalyst — massive fiscal stimulus, reopening, supply chain shortages. We don't have that catalyst today. Luna: So the divergence isn't a glitch. It's a signal that the market is pricing in different scenarios for gold and silver. Gold is saying 'I'm worried about geopolitics and inflation.' Silver is saying 'I'm worried about growth.' Lucas: And right now, the growth worry is winning for silver. But it's worth watching the ratio. If it breaks above 65, that's historically been a screaming buy signal for silver. We're not there yet, but we're getting close. Luna: What about the broader metals complex? Copper is also down a bit this week, but only 0.4 percent. It's holding up better than silver. Lucas: Copper has its own story — tight supply, energy transition demand. But copper is also more tied to infrastructure and construction, which still have government backing. Silver's industrial demand mix is more consumer electronics and solar, which are more sensitive to the business cycle. Luna: So silver is caught between two worlds, and right now neither world is particularly friendly. Geopolitical fear isn't lifting it like gold, and growth fears are dragging it down. Lucas: Exactly. And you see it in the price action. Silver broke below $75 this week and hasn't been able to reclaim it. That's a technical level that traders are watching. If it stays below, you could see more selling. Luna: What about the investment demand side? Are people piling into silver ETFs? Lucas: Actually, net flows into silver ETFs have been negative this month. So even the speculative money isn't stepping in to buy the dip yet. That's another sign that sentiment is cautious. Luna: Gold ETFs, on the other hand, have seen modest inflows. So the money is choosing gold over silver right now. Lucas: Right. And that's consistent with the narrative. Gold is the safe haven. Silver is the industrial play. When investors are nervous about both geopolitics and growth, gold wins. Luna: So what would change the story for silver? What would make it rally? Lucas: You'd need either a clear improvement in industrial demand — maybe a China stimulus package that boosts manufacturing, or a big solar buildout announcement — or you'd need a sharp escalation in geopolitical tension that drags silver along with gold. But the latter is less likely because silver's industrial exposure would still cap gains. Luna: And if the Fed actually cuts rates, that could help both metals by lowering the opportunity cost of holding them. But Kashkari's comments today suggest no cuts soon. Lucas: So for now, the path of least resistance for silver is lower. But that doesn't mean it's a bad asset. It just means you have to be patient and have a view on the industrial cycle. Luna: One last thing — the silver market is much smaller and more volatile than gold. So when it moves, it moves fast. Could we see a sharp reversal if sentiment shifts? Lucas: Absolutely. Silver has a history of violent rallies. If the ratio gets stretched too far, the snapback can be brutal. But you need a trigger. Right now, we're waiting for one. Luna: So keep an eye on the gold to silver ratio. And maybe on the next China industrial data release. Lucas: Exactly. That's the playbook. For now, gold is king, silver is waiting.