Silver is having trouble behaving like a haven. Even a sharp escalation in the Middle East has failed to put a floor under the metal, which is on course for a weekly loss of more than 7 percent and is trading around US$55.50 on Friday after a bruising stretch of selling.
One of the clearest signs of that underperformance is the gold-silver ratio, which has climbed to 70.7 to 1, the highest level in two years. In other words, gold is proving far more resilient in a difficult macro backdrop, while silver is being treated less as a crisis hedge and more as a cyclical metal.
The latest pressure point came from the US Federal Reserve. Dallas Fed President Lorie Logan, a voting FOMC member, said on 16 July that moderately higher rates were still needed to bring inflation back to the 2 percent target. She pointed to a solid labor market, but said she still saw no wage-driven inflation. At the same time, Logan flagged fresh price risks from the Middle East conflict and from the power-hungry, capital-intensive build-out of AI data centers.
Fed Vice Chair Philip Jefferson struck a slightly softer tone, saying stable interest rates were appropriate for now but leaving the door open to further hikes if inflation does not ease sustainably. New York Fed President Williams, by contrast, said inflation already appears to have peaked. The next Federal Open Market Committee meeting is due on 28 and 29 July, and that wait-and-see period is adding to the uncertainty surrounding non-yielding assets such as silver.
The geopolitical backdrop has not helped. Reports of US strikes near Iranian export terminals and Tehran’s threat to block the Red Sea briefly sent investors hunting for safety, but the money went into the US dollar rather than into silver. That has left the metal caught between a stronger greenback and rising real-rate expectations.
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Oil has moved sharply higher on supply fears, stoking renewed inflation worries and reinforcing the case for tighter monetary policy. The combination of pricier energy, robust US data such as falling initial jobless claims and stable retail sales, and a firmer dollar has made silver less attractive relative to interest-bearing Treasury debt. Market participants have described the split response as unusual: the usual haven bid has been neutralized by rate anxiety and dollar strength.
Under the surface, the supply picture remains tight. China has been curbing mine output after a series of inspections and tighter safety rules, and that comes on top of a market that is already in its sixth straight year of structural deficit. Silver demand in solar manufacturing is being reduced through “thrifting,” but that weakness is being offset by continued physical demand from semiconductor production for AI infrastructure and from electric-vehicle components.
The longer-term imbalance is still visible in industry forecasts. The global market is expected to remain in deficit in 2026, with a shortfall of 46.3 million ounces. Mexico is central to that picture: the country is projected to produce around 172.9 million ounces in 2025, roughly one-fifth of global supply.
Trade policy is another variable hanging over the sector. On 1 July, the US rejected a continuation of the USMCA agreement in its existing form, leaving annual reviews as the new framework. That change adds another layer of uncertainty for North American supply chains, especially as Washington also weighs copper tariffs that could ripple into silver because the two metals are often mined together. The proposals under discussion include a 50 percent tariff on semi-finished copper products, while refined copper could face staged levies beginning in January 2027 and January 2028. COMEX copper inventories have recently risen sharply to 650,000 tonnes.
For now, traders are watching a key support level at US$55.70. A sustained break below that mark would leave the market vulnerable to more downside, while holding above it could be the first sign that a base is forming. Either way, the message from the two-year high in the gold-silver ratio is hard to miss: investors are still treating silver far more as an industrial metal than as a monetary shield.
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