Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Why Silver Is Falling While Gold Rises
Transcript
- Lucas: So gold is at 4,116, up another percent on the week. Silver? Down almost two percent. That's a pretty sharp divergence from what we were seeing just a month ago. Luna: Right, a month ago silver was the star. Episode 126 we were talking about how silver was outpacing gold. Now it's the laggard. Lucas: Exactly. The gold-silver ratio has widened back above 71. And I think the story here is really about what's happening with industrial demand versus pure safe-haven flows. Luna: Before we dive deeper—this kind of clear, ad-free analysis is exactly why listeners keep coming back. If you find value in walking through the economy with us, you can support the show at buy me a coffee dot com slash fexingo. It keeps us independent. Lucas: Yeah, no pressure at all. Just people who care about the show making it possible. So back to silver—let's talk about why industrial demand is suddenly weighing on it. Luna: Well, copper is barely up, only 0.3% this week, and that's often a bellwether for industrial activity. Silver has significant industrial uses in electronics and solar panels, so a slowdown there hits it harder than gold. Lucas: And you have this interesting backdrop: the 10-year breakeven inflation rate dipped to 2.20%—so inflation expectations are cooling. Normally that would be a headwind for gold too, but gold is rallying. That tells me it's more about risk aversion. Luna: So gold is acting like a pure safe haven, while silver is getting caught up in industrial growth concerns. And the tech earnings this week—Microsoft beat, but Meta disappointed—that might be feeding demand worries. Lucas: Exactly. Qualcomm also issued light guidance, citing memory crunch and price increases. So there's a sense that the tech cycle might be peaking. That directly impacts silver demand because it's used in semiconductors and connectors. Luna: Let's put some numbers on it. Silver at 57.62 is down 1.8% in five days. Gold at 4,116 is up 1.2%. So gold is up roughly $50, silver down about a dollar. The ratio widening from around 68 to over 71 is significant in such a short time. Lucas: And it's not just the ratio. Look at the broader commodities complex: oil is plunging, WTI below 85, Brent below 91—both down over 5% in a week. That's a massive demand signal. Natural gas also down 5%. So energy is screaming slowdown. Luna: Meanwhile grains are mixed—wheat down 2.7%, corn up 1.5%, soybeans down 4.5%. So industrial commodities broadly are under pressure. Precious metals are the exception, and even there, silver is getting lumped with the industrial crowd. Lucas: I think that's the key insight. The market is drawing a line between things you use in factories and things you hoard when you're nervous. Gold is in the 'nervous' pile; silver is straddling both, and right now industrial is winning the tug of war. Luna: What about the inflation data? CPI for June came in at 332.6, down from 333.98, so headline inflation is actually falling. Core CPI flat. That should be good for growth but it's not boosting silver. Lucas: Because markets are forward-looking. They see inflation cooling but also see growth slowing. The PCE price index actually ticked up, but the core PCE is still above 2%. So the Fed might be on hold, but the risk of a hard landing is creeping in. Luna: And a hard landing would crush industrial metals. Silver has a dual personality—it's both a monetary metal and an industrial one. When recession fears spike, the industrial side drags it down, while gold just shines. Lucas: Right. That's exactly what we're seeing. Now, could this reverse? If the Fed signals a cut or if industrial data surprises to the upside, silver could catch up quickly. But for now, the trend is clear. Luna: What are you watching as a catalyst? The next JOLTS report? PMI data? Lucas: Yes, and also the earnings from basic materials companies. But more immediately, I'm looking at the dollar and real yields. Real yields have been falling, which supports gold, but if they stabilize, silver might get a bid. Luna: Speaking of the dollar, it's been relatively flat this week, so it's not a currency story. This is really about asset allocation within the precious metals space. Lucas: Let's zoom out. Since the start of the year, silver is still up—but it's given back a lot of its outperformance. In June, silver hit highs near 62. Now it's 57.62. Gold, on the other hand, continues to grind higher from 4,000. Luna: So for investors who own silver, the question is whether to hold or rotate into gold. I think the answer depends on their view of the economy over the next few months. Lucas: If you think we're heading for a recession, stick with gold. If you think this is just a soft patch and industrial demand rebounds, silver could offer more upside from these levels. I'm not making a call, but I am pointing out the divergence. Luna: And that's the value of understanding these cross-market relationships. The gold-silver ratio is a classic indicator, but you need to know why it's moving, not just that it is. Lucas: Exactly. So, silver's falling because industrial demand fears are outweighing safe-haven appeal. Gold's rising because—well, there aren't many better places to hide right now. That's the story for late July. Luna: And it's a story we'll keep tracking. For now, thanks for listening to The Commodities Economy with Fexingo. Lucas: If you want to hear more episodes like this, remember you can support us at buy me a coffee dot com slash fexingo. It helps us stay ad-free and focused on what matters. We'll catch you next time.