Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Silver's 12 Percent Plunge vs Gold's Slide What the Divergence Means
Transcript
- Lucas: Gold is down five percent over the past five days. Silver has fallen twelve and a half percent. That is not a typo — silver is getting crushed more than twice as hard as gold. Luna: And it's not just a one-day thing. Silver has been underperforming gold for weeks. The ratio is blowing out. Lucas: Right. The gold to silver ratio is now around 67 to 1. Historically, when that ratio spikes, it's often a signal that either silver is oversold, or the economy is heading into real trouble. This time, I think it's both. Lucas: Before we go deeper on that, I want to mention something. This show — and every show on this network — is deliberately ad-free. No sponsors, no commercials, no product pitches. If you get value from that, and you want to support the choice to keep it that way, the link is buy me a coffee dot com slash fexingo. No pressure, just a way to keep the thing going. Luna: Yeah, it's a small thing that makes a big difference. And we really appreciate everyone who does. Lucas: So back to silver. The reason it's getting hit harder than gold is partly structural. Gold is almost pure safe haven. Silver is a dual asset — safe haven plus industrial metal. And right now, the industrial side is flashing serious red. Luna: S&P just put out data saying factory job cuts in June are nearing levels we saw during the financial crisis and Covid. That's not a subtle signal. Lucas: Exactly. Over sixty percent of silver demand comes from industrial uses — solar panels, electronics, automotive components. If factories are cutting jobs, they're cutting production. That means less silver being consumed. Luna: And gold doesn't have that exposure. Jewelry and central bank reserves are less cyclical. So gold is down, but silver is in a different category. Lucas: There's also the tech angle. Silver is critical for photovoltaic cells. Solar installations are still growing globally, but the pace has slowed. China's manufacturing PMI has been contracting, and Europe is skirting recession. So the marginal demand growth that was propping up silver has weakened. Luna: Meanwhile, the dollar is still relatively strong. The DXY has been hovering around 104, 105. That puts pressure on all dollar-denominated commodities, but it hits the ones with weaker demand stories harder. Lucas: And then there's the rate backdrop. The ten-year breakeven inflation rate is at two point two three percent — that's down from the highs. If inflation expectations are cooling, the inflation-hedge argument for precious metals loses some of its punch. Gold feels that, but silver feels it more because it trades with more volatility. Luna: Let's talk about the ratio. When gold to silver gets above 80, historically it's been a buy signal for silver. We're at 67 now. Not extreme yet, but moving fast. Lucas: Right. In 2020, the ratio spiked to over 120 during the Covid panic. Then silver rallied hard. In 2008, it hit over 80 during the financial crisis, and again silver rebounded. But the key difference is that in both those cases, central banks stepped in with massive stimulus. This time, rates are still elevated. The Fed has not signaled a cut. Luna: So the playbook may be different. If recession hits and the Fed eventually cuts, that could be the catalyst for silver. But we're not there yet. Lucas: And in the meantime, silver supply is actually pretty tight. Global mine output has been flat to declining for years. A lot of silver is produced as a byproduct of copper and lead-zinc mining, and those operations are scaling back because of lower base metal prices. So you have this tension: supply shrinking, but demand falling faster. Luna: Which explains why silver is down twelve percent while gold is only down five. It's the classic leveraged move. Silver's beta to gold is usually around 1.5 to 2 times. When gold falls, silver falls more. Lucas: For listeners who track these things: silver futures are currently around 61 dollars 78 cents. That's down from a peak near 75 dollars earlier this year. If you look at the chart, it's basically given back all of its 2026 gains. Luna: Gold is still up for the year, though. It's around 4140, from about 3800 at the start of the year. So the narrative is not 'precious metals are collapsing' but 'precious metals are rotating.' Lucas: That's a fair way to put it. Investors are saying: I want safe haven, but not industrial exposure. So they buy gold, they sell silver. And you can see that in the ETF flows. The big gold ETFs have seen modest outflows, but silver ETFs have seen much larger redemptions. Luna: So who would be buying silver right now? Contrarians? Industrial hedgers? Lucas: Mostly risk-tolerant speculators betting on a reversal. And some industrial users might be locking in prices for future delivery if they think this dip is temporary. But the broad institutional money is not piling in yet. Luna: One thing that strikes me is the solar angle. Even if installations slow, they're not stopping. The energy transition is still a multi-decade trend. So the long-term demand thesis for silver is intact. It's just the short-term cycle that's brutal. Lucas: Absolutely. If you believe that solar capacity will double by 2030, silver demand from that sector alone could grow twenty to thirty percent. But right now, the market is focused on the next quarter, not the next decade. Luna: And the next quarter looks shaky. The S&P factory job cuts data is from June 2026. That's current. If we get more weak manufacturing data, silver could test lower. Lucas: Technically, silver has support around 58 dollars. That's the 200-day moving average. If that breaks, we could see a move toward 55. But if the ratio keeps climbing toward 70 or 75, that's historically been a zone where silver starts to look cheap. Luna: Let's zoom out. Is there any scenario where silver rallies while gold falls? That would be unusual. Lucas: It would require a sudden burst in industrial demand — maybe a China stimulus package, or a big infrastructure bill somewhere. Or a supply shock — a major mine closure. Barring that, silver tends to follow gold's direction, just with more amplitude. Luna: So for investors watching this space, the key indicators are: the gold-silver ratio, the dollar index, and the monthly manufacturing PMIs. If we see a turn in any of those, silver could reverse fast. Lucas: And the Fed. Always the Fed. If the market starts pricing in rate cuts for later this year, that would weaken the dollar and lift both metals. Silver would benefit disproportionately. Luna: But for now, the message is clear: silver is taking a beating, and it's not just a precious metals story. It's a global industrial demand story. Lucas: Which is why this divergence matters. It's telling us something about where the economy is heading. If you want a real-time read on recession risk, ignore the stock market for a moment and look at the gold-silver ratio. Luna: And if that ratio keeps climbing, we may not have seen the bottom yet — for silver or for the broader economy. Lucas: That's our show. We'll keep watching the numbers. Thanks for being here.