Silver crashes 43% in two months as gold holds steady amid chaos

Silver prices have plunged by 43% in under two months, dropping from a record high of $121.67 to $69.50. The steep decline follows rising energy costs, industrial slowdowns, and geopolitical shocks in the Gulf. Meanwhile, gold has shown more resilience due to steady demand from central banks and institutional policies.

The sharp fall in silver stems from multiple pressures. Over 60% of its demand comes from industrial uses, including electronics, AI chip packaging, solar panels, and electric vehicle wiring. When energy prices spiked and factory costs rose, industrial activity slowed, dragging down silver's demand.

The situation worsened after Iran's attack on Qatar's Ras Laffan helium complex in 2024. Before the strike, the facility supplied 30 to 33% of the world's helium—a critical resource for chip fabrication. The disruption now threatens semiconductor production, particularly in South Korea, the US, and China, where major manufacturers like Samsung and SK Hynix rely on stable helium supplies. While analysts see no immediate crisis, a prolonged conflict could destabilise smartphone, laptop, and PC production globally. Unlike silver, gold has retained more stability. Central banks, including China's PBOC, have bought gold for 16 consecutive months, with 77% planning to increase reserves. This institutional support creates a structural floor for gold prices, even as markets adjust to potential interest rate hikes. Central banks are now pricing in higher borrowing costs. The Federal Reserve sees a 50% chance of a rate hike by October, while the European Central Bank and the Bank of England each anticipate three or more increases by 2026. These expectations add further pressure on industrial metals like silver, which lack a central bank safety net.

Silver's steep decline reflects its heavy reliance on industrial demand, now weakened by rising costs and geopolitical instability. The destruction of Qatar's helium plant adds another layer of risk for chip manufacturers, though immediate shortages remain unlikely. Gold, in contrast, benefits from sustained central bank purchases, offering it more protection against market volatility. The gap between the two metals highlights how different forces shape their value in uncertain economic times.