Silver experienced a sharp decline, dropping 7% on Friday and reaching a 7-month low of USD 28.3 per troy ounce. Since last Wednesday, silver’s value has decreased by around 16%, comparable to the fall in oil prices.
The gold/silver ratio rose above 100 for the first time since mid-2020, reflecting silver’s reaction to rising risk aversion. Industrial demand accounts for nearly 60% of silver’s total consumption, making it sensitive to economic conditions.
Silver’s Dual Nature
Current trends indicate that the ongoing weakness in silver prices may continue, impacted by fears of recession. The dual nature of industrial demand affects silver’s stability during economic downturns.
This recent move in silver prices has drawn considerable attention for good reason. After dropping 16% in such a short stretch—mirroring the fall in oil—it’s become clear that sellers are not waiting around. The metal touched a 7-month low, firmly under pressure, and this is happening as broader market sentiment has shifted rapidly.
The jump in the gold/silver ratio past 100 isn’t merely a footnote either; that metric crossing such a level means silver is underperforming gold by a wide margin, which historically signals rising caution in markets. When this ratio moves sharply, it often does so because market participants are moving towards perceived safety, and away from assets tied to industrial activity. And silver—unlike gold—is heavily linked to industrial output, with roughly 60% of total demand driven by sectors like electronics, solar energy, and medical devices. When that engine slows, silver doesn’t sit still—its price reacts quickly.
Market Volatility And Recession Fears
There’s no denying that rising recession concerns have brought more volatility into metals markets. With the economic data skewing weaker, and expectations around global growth pulling lower, we’re seeing real risk-aversion ripple through commodities. Silver, because of its dual exposure to both financial and manufacturing demand, is more exposed than many realise. That percentage tied to industrial use puts it in a tricky spot when data surprises to the downside.
For those of us active in the derivatives space, these moves demand tighter focus. The magnitude and speed of silver’s decline are laying the groundwork for strategies that must adapt quickly. We’ve already seen volatility pick up in silver options, reflecting the uncertainty and fast-changing sentiment. Futures pricing points to further softness, but we should be wary of chasing moves too late—liquidity can become patchy during sharp sell-offs, as we saw late last week.
Recession fears aren’t going away tomorrow. However, they don’t always lead to extended downtrends without interruption. Short bursts of repricing—especially after a steep decline—often offer moments of consolidation, and that’s when mispricings can emerge. But the bias remains transparent: positioning has begun favouring downside skew, evident across both weekly expiries and longer-dated contracts.
Considering the way forward, the market reaction seems rooted in both macro pressures and sector-specific weakness. Manufacturing projections haven’t improved, and until they do, silver may keep facing downward stress. Time spreads are widening—this speaks to expectations that any rebound won’t be immediate. When spreads move like this, it points to participants pricing in more short-term downside before any kind of medium-term recovery.
What’s particularly relevant now is the shift in sentiment across risk assets. Equities have wobbled, bond yields climbed, and industrial commodities collectively showed softness. For us in the option markets, it’s clearer than ever that demand for protection has picked up materially—hedging strategies are growing in volume, with implied volatility screens flashing red most of this past week.
Looking at positioning, managed money has started to unwind long exposure in silver at a faster pace. CFTC Commitment of Traders data confirms that trend. When large speculative players unwind aggressively, follow-on effects can amplify moves in short windows. Liquidity gaps widen, and the precision around entry points becomes even more important.
If we continue to track the macro tone, short-term flows are likely to remain defensive. However, there’s room for overshooting. We find that after this kind of sharp pullback, option premiums can either remain elevated or drop sharply, depending on incoming data. The next batch of economic releases could catalyse either reaction.
In terms of structure, the steepness in negative gamma exposure is something we’re watching closely. Dealers may need to hedge dynamically, further fuelling volatility around key levels. This activity explains part of last Friday’s late acceleration on the downside, with moves exacerbated by volume thresholds being clipped during low liquidity.
We do not expect this narrative to shift dramatically in the immediate sessions, barring a positive shock in macro indicators. Traders will need to assess pricing probabilities with extra care; misjudging velocity and duration can prove costly, especially with the market now trading well outside recent value zones. Maintaining discipline in position sizing and staying nimble will serve us better in this climate than leaning too heavily into reversals without confirmation.
Watch skew trends and open interest consolidation to gauge where participants begin to build conviction again. Until then, expect the weight on silver to linger.
