(Kitco News) - Economic fears are soaring as the world continues to react to U.S. President Donald Trump’s global import tariffs, which have upended international trade. These fears have pushed silver prices to a five-year low relative to gold.
Analysts note that both gold and silver have been caught in the broad market selloff. The S&P 500 is experiencing its worst weekly decline since 2020 when the global economy shut down due to the COVID-19 pandemic. The index is on track to end the week down 7.7%.
Despite its losses, the gold market has held up better than equities, falling only 2% this week. Spot gold last traded at $3,019 an ounce, down 4% from Thursday’s overnight high of $3,167 an ounce.
However, silver is seeing significant damage, as it looks to end the week below $30 an ounce. Spot silver last traded at $29.62 an ounce, down more than 13% from last week.
The underperformance of silver compared to gold has pushed the gold/silver ratio above 100 to its highest level since mid-May 2020.
Economists have said that Trump’s global tariffs will significantly impact economic growth, potentially pushing the economy into a recession. According to some commodity analysts, the threat of a recession is weighing on key industrial commodities. Silver—despite its limited role as a monetary metal—is being swept up in the selloff.
Roughly half of global demand for silver comes from industrial use. Silver has played a critical role in the electrification of the global economy; however, analysts note that if economic activity slows, the demand for silver will likely fall as well.
“Silver is not recession-proof. It is, at its core, an industrial metal,” said Chris Vecchio, Head of Futures Strategies and Forex at Tastylive.com. “If you are looking for a recession-proof metal, gold is your only option.”
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that alongside economic fears, gold and silver are being affected by the unwinding of arbitrage trades triggered by Trump’s tariff threats. Large quantities of gold and silver flowed into New York vaults as bullion banks and market players sought protection from potential tariffs. However, both metals are exempt from Trump’s tariffs, and the North American premium in futures versus physical bullion has collapsed.
“A 51% year-to-date increase in silver flows to COMEX-monitored vaults now faces the risk of a partial reversal, potentially adding supply to a market already weakened by short-term recession concerns,” said Hansen in a note.
While silver prices appear attractive compared to gold, Hansen said investors should remain cautious and consider buying once the market stabilizes.
Although silver’s performance has been disappointing, Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said it’s not surprising, but added that this may present a new opportunity for investors.
“Historically, a ratio this high has often signaled a reversion—back in 2020, it spiked before silver significantly outperformed gold. With silver down while gold holds up better, this could be an opportunity for a tactical play,” he said. “If industrial demand stabilizes or tariff fears ease, silver could catch up fast, especially with its long-term supply deficit still in the picture.”
