Gold, silver and crypto

Pushkin. This has been a big year for shiny stuff. Gold, of course, has had a spectacular run higher, cruising to $4,000 an ounce and beyond. But stand aside, gold, because your scrappy little cousin Silver would like a word. What a year it has been for silver. So gold's up like 60-ish percent. Silver's up 120 percent this year. Silver fever, boys and girls. Get on board.

So is the rise in the price of silver a sign of fear in markets or a sign that bubbly exuberance is taking hold? And what does this all have to do with gold and also, I hate to say it, but with Bitcoin?

Today on the show, fear, greed and slightly wacky, paranoid worldviews. This is Unhedged, the markets and finance podcast from the Financial Times. I'm Pushkin. I'm Katie Martin, a markets columnist here at the FT in very Christmassy London. I have some hard yards of Christmas drinks ahead of me this week. Remember, folks, this is why we train. And I'm joined down the line from New York City by the big man, Rob Armstrong, president of the Unhedged newsletter. Rob...

How's it going? It's going incredibly well. Really? Because of the price of silver. I want to describe to you a happy coincidence in the life of the Armstrong family. Yeah. My beloved mother, Catherine, moved this week with some help from me into a retirement community. Very nice place. But the downsizing means. There has been a big shakeout of family silver. And it's all going straight to the pawn shop and selling at record high prices.

How much silver are we talking here? Are you a silver bajillionaire now? It is two strange Victorian teapots, a set of teaspoons and a ladle or something like that. I'm rolling around in my hundreds here, Katie. The beers are on you. So, Rob, you've ridden the wave, effectively, almost unwittingly in silver prices, and now you are a seller, but...

Generally speaking, generally speaking, trading silver is for weirdos. Am I wrong? It is. And I think the crucial fact is it's a thinner market than gold. Gold has this huge global apparatus set up for moving it around, trading it, owning it, speculating on it Whereas silver is a much thinner market. So when the speculative bug or the shadow of FOMO falls over the silver market, that market is going to react a lot.

more strongly because it's less liquid and therefore more sensitive to incremental demand.

And hell yeah, it is certainly moving. So in your kind of hierarchy of like asset classes that tend to attract unorthodox people, I'm going to say, like... Gold has always historically attracted a fairly deep bench of slightly strange people. It's gone more mainstream now in part because of central bank purchases and then a kind of speculative rush. But so there's gold. There's Bitcoin, which is almost entirely a thing that exists for opportunists and the conspiracy-minded. Please do not...

bother emailing me again if you're one of those people. Please rest assured you are already blocked. But silver is right up there, right? It's like if you look at like wackadoodle websites that are convinced there's a shadowy cabal of elites who are rigging the financial system and you should buy like guns and tinned food and a shack in the woods.

They always have adverts on them for silver. This is like a thing. It's always been a thing. And it's just never been quite as kind of cool or as mainstream as either of the others. But we did see it spike. In a way, not dissimilar to what it's doing now back in 2011 when gold had its last. Moment of great excitement when we were kind of reeling from the great financial crisis and we weren't sure if we could trust paper assets and Silver did catch a bit of a fire

back then, too. So this current situation is not unprecedented in kind, but it's definitely unprecedented in level. I mean, we're at a price we've never seen before. In terms of the jump so far this year, so we're up about 120% on silver this year, taking the price to about $64 an ounce. Gold has jumped about half that, but it's currently worth about $4,300 an ounce. So they're kind of...

They're sort of different beasts, but it's funny, right? Because I talk to big investment firms every day and institutional investors, people who run pension money and insurance money and that sort of thing.

They really don't care about Bitcoin, honestly. They think it's a useful kind of measure of general market exuberance, but they don't care about it that much. They do care about gold now in a way that they haven't for years. That is working out as a very nice hedge for a bunch of different things.

But silver never, ever, ever comes up in conversation with investors. And suddenly it's just jumped so much that it's like, OK, fine, we're going to have to pay a bit of attention to this thing. I mean, it's just the fact that it is. a fraction of the price for the same unit of weight just makes it a lot less convenient. You move a couple of pounds of gold around, you're talking real money, right?

Not so much silver. So it's just not as portable and convenient an asset. But as you said, it does have industrial use. And from what I understand, demand from that quarter is pretty solid right now. So that helps. You know, it's not that gold has no industrial uses. I get grumpy emails from people when they think that's what I've suggested, which it isn't. But like silver is a bit more of an industrial metal. It's useful in...

in the solar sector, for example, you know, for solar panels and for electronics and all that sort of stuff. And actually, the fact that it's a bit more of an industrial metal than gold does mean it's got a different relationship with markets in general because gold moves up and down.

oh god we could get into this but like one of the reasons why it does it is when people are feeling kind of nervous about the state of the world That doesn't quite work when you've got something that's a bit more of a sort of cyclical metal and that has more of a kind of industrial flavour to it.

It's probably worth mentioning, if I might do one of my trademark interruptions here, Katie. Sure. It's probably worth mentioning in this context that copper is on a bit of a rip right now, too. Dr. Copper, as they say, which is called Dr. Copper because of its PhD in economics, meaning the price is supposed to tell you a lot about.

the economy getting better. And I got quite excited about when I noticed the price of copper going on a tear and called a bunch of copper experts last week and asked them, does this mean the industrial economy is reviving? And they were like, no, not really. Good chat. Thanks. Thanks, copper people. I mean, demand is fine for copper. China, which is the great consumer, is okay. But the recent spike seems to have as much to do...

with supply as it does with demand. Copper comes from a relatively small number of places around the world where it is mined. And if like one mine goes down because of some horrible industrial accident. It changes the price quite quickly. So it's more of a supply story. And in general, there's been a rally in commodities from food to natural gas, everything basically but oil. But most of it seems to be supply rather than demand.

Oriented primarily. So with silver, apparently there is strong physical demand at the moment from Indian consumers. And you've got this whole like demand from the solar sector. But like people keep pointing out like. That's kind of been a thing for a while. And the market has been in like deficit for like most of the past five years. So why has the price suddenly accelerated now? So there's a bunch of reasons people are putting on this.

One is that there's a big stockpile of silver. Our colleague Leslie Hook was pointing this out in a piece the other day. She was noting that... A big stockpile of silver is built up in the US as a result of fears of potential US tariffs on silver, which have compounded a shortage elsewhere. I had not heard that. That is interesting.

Apparently, silver inventories are about three times the size of their historic average because people are stocking up on silver just in case they fall in scope of tariffs. And we will know for sure in a few months whether that... So that's kind of one of the reasons why this is happening. The big difference from gold is that...

The thing that really started the, like kicked off the ascent in gold prices was a huge, and we've talked about this on the show before, but this huge accumulation of demand from central banks. who didn't want dollars because they saw what happened to Russia's dollars after it invaded Ukraine. And lots of countries are thinking, well, just in case I do something incredibly stupid and aggressive, I better move some of my money out of dollars as well and park it in gold or something else.

Gold, the despot's friend. It is the despot's friend. It's not clear that a similar thing is going on with Silva. We might not necessarily know whether a similar thing is going on with Silva. don't have to report it in the same way. But I caught up earlier with a very helpful chap called Hamad Hussein, who's from Capital Economics, who was saying, yeah, we don't think that central bank reserve buying is a big factor here.

So I think there's a couple of things going on. One is when I talk to big investors, they talk about, look. We feel pretty positive about 2026. We think there's a lot of things that are going to go right for risky assets. But if we do want somewhere to hide in case things go wrong...

The dollar doesn't work quite like it used to. The yen doesn't work in the same way as it used to. The Japanese yen always used to go up in times of stress, doesn't seem to do that anymore. Swiss franc is a bit problematic. So gold is right up there at the top of people's shopping lists. something to just stock up on for a rainy day. We have got this sort of shrinking pool of safe assets kicking around in the world. And so...

When that pushes the gold price higher, it's almost like silver just moves up in sympathy. Yeah, I think that's right. And it may just be good old-fashioned retail and hedge fund speculative frenzy. Line go up. Get online and off we go. Ride line. I mean, I think ride line is a really underrated factor here. I've been banging on about this this year in relation to the gold price. So I wrote a piece a couple of months back about...

There was so much demand for buying gold on the Royal Mint website in the UK, just like on a Saturday night while Strictly Come Dancing was on TV. The website was so rammed with people wanting to buy gold that they had to institute a queuing system for the website on like a random Saturday evening. Whoa. This is not people sitting around thinking about...

fiat currency debasement. This is like ordinary people who can see a line going up and thinking, I'll have a bit of that. Thanks very much. And it's not just ordinary people. I mean, there's a whole class of professional investor. who is a momentum investor. And we know it is a fact that prices have momentum. Prices that are rising tend to keep rising. And so you play it, right? And that all makes sense.

But all of this, Katie, raises an important question. If speculative frenzy is stalking the land, why isn't Bitcoin rising? That should be the one. If silver is kooky and gets a case of the kookies, Bitcoin should be going twice as kooky. Don't you agree? Bitcoin has sort of run out of people to keep on buying it. You know, so, OK, gold is like a historically important asset. Silver has some industrial uses.

Bitcoin just goes up and down when it goes up and down. It's like a more buyers and sellers thing. If you have a more intellectual reason for this, Rob, please do share it with the class. Well, so just to give the context here. 5 October, Bitcoin, 125 grand. Most recent price, 87 grand. Pretty big swoon there. Yep. And... Here is a complete guess for the difference with silver and gold. Perhaps the Bitcoin trades are more leveraged. So it had a blip.

And somebody got a margin call or a bunch of people got margin calls on their Bitcoin. And once that starts happening, it's kind of off to the races. Yeah, so leveraged for the uninitiated is where you borrow money to buy something. This is generally...

A very, very, very, very, very bad idea, by the way. You've got to be careful, yeah. People do it. Careful now. It's all well and good when it works, and then when it doesn't work, you get in very hot water very quickly. And there's only so many... In the face of perhaps a large community of Bitcoin holders who have received margin calls, which means whoever lent you the money rings you up and says, I can't help but notice that you're...

Position is going south, and I would like my money back, please. Against a large community of people who are getting phone calls like that, there's only so much that What's-His-Name over at Strategy can do buying the things. Michael Saylor from Strategy. This is the beast formerly known as MicroStrategy that used to be a software company about a million years ago. And now the only thing it does is buy Bitcoin.

And they have been buying it. I think they bought some again into the weakness. The argument was that they wouldn't be able to buy into the weakness and they are buying. Yeah, but they've got some debts to repay and they might need to do that in actual money and they're talking about having to also build up reserves of actual money rather than pretend internet money.

And he's also, Michael Saylor, has publicly acknowledged the concept that at some point he may have to sell some Bitcoin. And previously he has been, you know, you take this Bitcoin from my cold, dead hands. I will never, ever, ever sell. And just the suggestion that he might sell in certain circumstances has been enough to help depress the price of Bitcoin. It does show you what an emotional asset Bitcoin is. And speaking of emotion.

A slightly clunky segue from silver to the broader market. I like to look at city groups. sentiment measure which bundles together a whole bunch of things like short interest investor surveys and put call ratios and You know, all this kind of stuff. And they put the index together and they call it the Levkovich Index. And I like it because it's a very broad index of sentiment. And that has broken above what they call the euphoria level.

What's after euphoria? I don't know. I mean, I should context it. Sentiment is not as completely bonkers as it was on this. Citigroup Index. It's not as completely bonkers as it was in 2021, right? When it was like the great post-COVID madness. Right. When everybody was buying everything that wasn't nailed down. But it's pretty darn high by historical standards. Yeah. I mean, this is the other thing that like convinces me that the jump in the price of silver is a sort of it's a symptom of.

widespread exuberance in markets. So you like the Levkovich Index, I like looking at the Bank of America Fund Manager Survey. That just came out today, the latest one. It turned out that fund managers have... a 3.3% allocation in their portfolios to cash, which is like, you know, you're super, super safe kind of deposits, money market funds, that sort of thing. That is a record low. So people are seeking safety.

at a vanishing rate. So people are all in on risky assets. Couldn't it be that they just like cash less well now? Is there some inflation risk price in there? Now I'm just reaching, of course. I think you're reaching. I think there's just... huge levels of exuberance that are out there, and I think that is sweeping up all sorts of different assets. Yeah, okay, so like Bitcoin is a bit of a fly in the ointment in this overarching theory that I have here, but everything else is just like, wahey!

yeah let's go you know gold and silver off to the races stocks are doing like pretty well you know we had some patches of wobbles but it's doing pretty well the bond market is like pretty well behaved I have another exception, Katie. You do? The eager student raising his hand at the back of the class here. I have one. Another exception is at the periphery of the AI bubble.

Some stocks are getting in a little bit of trouble. So Oracle, which is a kind of Mag-7 AI wannabe. CoreWeave, which is a very speculative AI name. Broadcom, which is warehouses full of computers in the desert somewhere or something. Anyway, these things are struggling. So I would say it is not a totally. unqualified let's go crazy you know 1999 style party out there there are little bits

But on broad measures, there's no question sentiment is suddenly running very high, which is, of course, a contrary indicator. It's not a timing mechanism. But as a general rule, sentiment is a contrary indicator. And it makes sense that it should be. Yes, when everyone is miserable, that's when you should buy. That's when you should buy.

Exactly. And when everyone is too, too, too, too happy, that's when you should sell. Because everybody already owns everything already. There's nobody left to be the incremental buyer because already everybody bought already. Right? So I think this is a slightly...

You know, we are often accused by listeners of being a little grouchy on the show. And that is fair. We are financial journalists. It is a disease we suffer from. But I think sentiment, you know, as you know, my attitude towards the market coming into 2026 is pretty good. I'm optimistic overall about next year, but this sentiment thing I don't love. I wish people were feeling worse so that they could change their...

so that they could change their minds and feel better. Merry Christmas, everyone. Please be a tiny bit more miserable for Rob. Listeners, if you have any more deep and meaningful theories here around what's happening to silver or to risk sentiment... In general, then unhedged at ft.com is the email address for you. We're going to be back in just one second with Longshot.

Okie doke, it's time for Long Short, that part of the show where we go long, a thing we love, or short, a thing we hate. Rob, what are you saying? I'm going to be seasonally appropriate, Katie. I'm going to be long. The Christmas goose. I was actually fed goose at Christmas as a child when we would have Christmas at my uncle's house. With your silver platters.

on these strange silver platters. And I remember goose, which I have not eaten in, I don't know, 25 years, as being quite good. That may be the lens of nostalgia there. But I'm thinking maybe it's time to try Goose again. Maybe I can just go grab one in Prospect Park somewhere. I don't think it works like that. But have you ordered it already, though? Because, like, you've got to be on it. Oh, God. I've probably blown it already.

I'm also long a Christmassy thing. I am long sweet pastry. So if you work with me or you know me at all, you'll know that I make a large number of mince pies every December for Christmas. And I'm normally... a pastry purist do not mess with it it's just butter and flour and that's it but I have had my head turned by my friend Aisling who said if you add sugar and eggs and booze

Booze in your pastry, boys and girls. It's even more delicious. And I've got to say, they are very, very fine mince pies. And you've tried it and confirmed. It works. I can confirm that if you add booze to already boozy mince pies. then they are improved in quality. Yes. Speaking of booze, I'm heading out of here shortly for one of my many drinking appointments of the week. Rob, I really feel like, by the way, you could be quite a good Father Christmas, so I think you should...

Because you've got the beard. You go and get yourself a red suit. Listeners, we will be back in your ears on Thursday. So listen up then. Unhedged is produced by Jake Harper and edited by Brian Erstad. Our executive producer is Jacob Goldstein. Topher Forehairs is the FT's acting co-head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the unhedged newsletter for free.

A 30-day free trial is available to everyone else. Just go to ft.com slash unhedged offer. I'm Katie Martin. Thanks for listening.