Silver's recent 50% drop from a record high hints that an economic slowdown looms

By Myra P. Saefong

Silver is more 'economically sensitive' than gold, notes one precious-metals dealer

Silver's price action may offer hints on the economy amid inflation driven by rising fuel prices.

There's a relatively off-the-radar commodity that can provide hints on where the economy is headed - and it's seen its value drop more than 50% from a record high earlier this year.

"Silver is more economically sensitive than gold, so its recent price weakness may be a leading indicator of underlying issues in the broader economy," said Stefan Gleason, president and CEO at Money Metals Exchange.

Silver can be seen as hybrid leading indicator because of its dual role as a monetary precious metal and an industrial commodity. Prices for silver (SIZ26) (SI00) reached a record intraday high of $121.79 an ounce in late January, according to Dow Jones Market Data - but have since dropped more than 50% to end at $57.31 an ounce Friday.

Gold (GCZ26) (GC00) has dropped too, but nowhere near as much as silver. The yellow metal has lost over 25% from its record high of $5,626.80 an ounce in January.

Silver's decline "syncs up with the warning lights we are seeing in the energy markets - with persistently high energy prices virtually certain to slow the economy, or worse," Gleason told MarketWatch.

Year to date, U.S. and global benchmark prices for crude oil (CL.1) (BRN00) have climbed by more than 70%, in large part due to the ongoing conflict in the Middle East that has disrupted production and shipments of the commodity. In a sign of the rising cost of refined oil, the price of diesel at the pump has spiked nearly 78% since the end of last year to stand at $6.30 a gallon Friday, according to GasBuddy.

Those increases were evident in the latest U.S. inflation data, which showed hotter prices than the market expected. The consumer-price index rose 0.6% in September and gained 3.7% year over year, while the producer-price index was up 1.3% last month and climbed 6.3% year over year.

Silver, meanwhile, is "reflecting some of the economic headwinds higher inflation is causing in the global economy," said Dana Samuelson, president of American Gold Exchange.

He explained that gold and silver are, for most people, discretionary purchases - in other words, more of a want rather than a need. And when inflation erodes spending power, those discretionary purchases slow, Samuelson noted.

For now, it's tough to measure just how much the inflationary impulse of a roughly doubling of the diesel price in the last six months has had on the global economy, but the market could be starting to see the "first ripple of that inflationary impulse," he said.

"That may be what the declining silver price is telling us now, because silver's value is approximately 50% monetary and 50% commodity," said Samuelson. Gold has seen a smaller decline from record highs, but it's more of a precious metal - 90% monetary and 10% commodity, he said.

Silver is also more subject to investor sentiment than gold, said Robert Minter, director of ETF investment strategy at Aberdeen Investments.

Global central-bank purchases of gold were a key reason why prices for the metal reached a record high earlier this year, and central-bank purchases are a "strategic source" of demand for the yellow metal, said Minter. "That same-size strategic buyer does not exist for silver," he added, making it more sensitive to investor sentiment.

Silver's outsize selloff

It's true, however, that it's not unusual for silver prices to move a lot more than gold prices.

Silver's sharper price decline than gold reflects its "greater volatility, exposure to industrial demand, and the unwinding of earlier speculative enthusiasm," said Ryan McIntyre, president of Sprott.

Earlier this year, as prices for gold were on track to notch record highs, some traders looked for a cheaper and quicker way to participate in that rise, leading to what can be referred to as speculative enthusiasm in the market.

But volatility often accompanies large and quick moves, and that's particularly true when "turbulence hits major markets, causing liquidity-driven selloffs" like the one seen earlier this week, Samuelson said.

On Wednesday, silver for December delivery, the most active futures contract, fell 6.1%, the largest one-day drop since June 24, and settled at $55.88 an ounce, the lowest since Nov. 26, according to Dow Jones Market Data. Gold that day posted a modest decline of 1.7%.

Higher inflation readings are not surprising given high energy prices, but they still "spooked equity markets" Wednesday, said Samuelson. And when that happens, gold and silver prices can "temporarily suffer as a casualty of those selloffs," he said.

Once the dust settles from these market selloffs, gold and silver prices often rebound quickly due to bargain buying, Samuelson said.

Prices for both metals ended higher Thursday, even after producer-price index data also showed a bigger-than-expected rise. Silver rose slightly again on Friday, but was still down more than 6% on the week.

Looking further ahead, silver still has potential to find support from stronger demand, stemming from growth in artificial intelligence and the data-center build-out.

"Investment across smart-grid infrastructure and data transmission supports silver demand, and we see AI as a growth source for the next several years," said Trevor Yates, senior investment analyst at Global X ETFs. Silver's "increasing industrial utility" underpins the metal's growing physical scarcity, he noted, with the physical-market forecast to remain in deficit for the sixth straight year in 2026.

While silver could stay volatile in the short term, Yates said Global X ETFs increasingly sees precious metals as an "interesting opportunity" for 2027.

-Myra P. Saefong

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10-17-26 0830ET