Key insights
- An expert suggests silver's underperformance relative to gold signals weakening conditions for precious metals. Concerns about persistent inflation, fueled by geopolitical tensions and high oil prices, are prompting hawkish signals from the Federal Reserve, diminishing hopes for rate cuts. Higher rates make yield-bearing assets more attractive, weighing on non-yielding assets like precious metals. The fading optimism suggests a precious metals recovery is unlikely in the near term.
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The bear case for gold? Just take a look at silver.
Silver prices gained over 140% in 2025, easily outpacing gold's roughly 65% rise. This year, though, it's lagged the yellow metal: Gold futures are up about 7% so far this year, compared to silver's 5%. The reason? Because, according to David Russell, global head of market strategy at TradeStation, silver is a "high beta" counterpart to gold, meaning it tends to move more dramatically than related assets. And since the Iran war has fired up inflation concerns, weighing on gold, that's been even harder on silver. (Gold recently traded around $4,630 per ounce, while silver was $74.)
"When you're in a bullish market, the high beta asset will typically outperform," Russell said in an interview with Investopedia. "That relationship has reversed since about February. As gold struggled, silver has struggled more."
With crude oil prices remaining aloft, and no sign of a near-term truce with Iran, Federal Reserve officials have been more vocal about their inflation concerns. Analysts have viewed those comments as slightly hawkish, damaging hopes of rate cuts that markets were pricing in last year. Higher rates can make yield-bearing assets like short-term Treasurys look more appealing than precious metals and other assets that don't pay yields. The "lingering optimism from last year is slowly fading," Russell said.
That silver prices are lagging gold's so far this year is one indication that conditions once supportive of precious metals have turned, according to market experts.
That's not to say that the investment case underlying gold—whether it's the debasement trade; the idea that central banks around the world are panning the U.S. dollar for gold, a more neutral safe haven; or something else—is necessarily broken. But silver's relative underperformance and other factors suggest that a precious metals' recovery isn't likely to materialize anytime soon. After last year's blistering run higher, both gold and silver were in positive territory to start the year, but have fallen into the red over the past three months.
That dynamic was evident in the World Gold Council's first-quarter report on gold trends, published on Wednesday, which showed U.S. demand falling to a third of its 10-year quarterly average, driven primarily by a "sharp reversal" in physically backed gold ETF flows—funds like the SPDR Gold Trust (GLD) or the iShares Gold Trust (IAU)— in March.
Investments in gold via ETFs over the last decade have, on average, represented about 40% of quarterly net U.S. gold demand. They rose to more than 70% in 2025, the strongest year of inflows seen on record in dollar terms, and the second-highest in tonnage terms, according to the World Gold Council. Then record monthly outflows in March hit, more than offsetting inflows from earlier in the year, and eclipsing demand seen in gold bar and coin investments in the quarter, the firm said.
"U.S. gold demand weakness reflects a cyclical investment pause, not a breakdown in demand," the World Gold Council said.
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