Gold, silver and crypto

Katie Martin (0:09)

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 world views. 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?

Rob Armstrong (1:23)

It's going incredibly well. Because of the price of silver, I want to describe to you a happy coincidence in the life of the Armstrong family.

Katie Martin (1:37)

Yeah.

Rob Armstrong (1:37)

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.

Katie Martin (2:02)

How much silver are we talking here? Are you a silver bajillionaire now?

Rob Armstrong (2:06)

It is two strange Victorian teapots, a set of teaspoons and a ladle or something like that. So I'm rolling around in my hundreds here, Katie.

Katie Martin (2:21)

The bears 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, yes, trading silver is for weirdos. Am I wrong?

Rob Armstrong (2:37)

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.

Katie Martin (3:11)

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 are 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 tin 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.

Rob Armstrong (4:18)

But we did see its 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.

Katie Martin (4:48)

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 percent 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 sort of different beast, 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, okay, fine, we're going to have to pay a bit of attention to this thing.