Silver is down 1% year-to-date, while the dollar has tumbled 3.5% and gold has surged 4%, sending a possible warning signal to the broader market.
This dramatic divergence between gold and silver prices has sent the ratio of the two to multi-year highs.
The divergence between the two means prices for gold are 82 times those of silver, which is 27% more than the 10-year average.
As The Wall Street Journal reports, a higher gold-to-silver ratio is viewed by some investors as a negative economic indicator because money managers tend to favor gold when they think markets might turn rocky and discard silver when they are worried about slower global growth crimping consumption.
“There’s just not many people looking to buy silver at this point in time,” said Walter Pehowich, senior vice president at Dillon Gage Metals.
“There’s a lot of silver that comes out of the refineries, and they can’t find a home for it.”
The precious metals ratio last stayed above 80 in early 2016, when worries about a Chinese economic slowdown roiled markets, and in 2008 during the financial crisis. The ratio’s recent rise comes as speculators have turned the most bearish ever on silver and inventories in warehouses have risen, a sign there could be too much supply.
While investors have flocked toward gold with equity markets wobbling, money managers seeking safety or alternative assets haven’t favored silver.
“It’s not seeing great hedge demand because it’s just easy to go to gold,” said Dan Denbow, who manages the USAA Precious Metals and Minerals Fund . “Gold is a bit more predictable.”
As WSJ conclude, some analysts think silver’s underperformance is a negative sign for precious metals broadly because it is a less actively traded commodity, making it more vulnerable to bigger price swings on the way up and down.