WSJ Your Money Briefing - What It Means When Silver and Gold Are Gaining Popularity Again

Episode Date: April 29, 2025

When the economy is in flux, some investors return to a tried and true protection against market chaos: gold. Wall Street Journal reporter Aaron Back joins host Julia Carpenter to talk about the gold rally—and what it means for silver. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Conditions apply to all benefits. Visit pcfinancial.ca for details. Here's your money briefing for Tuesday, April 29th. I'm Julia Carpenter for The Wall Street Journal. Gold. A lot of people have opinions on how, if, and when you should buy it. But in times when the market is volatile, some investors turn to it for protection. Gold will do much, much better than stocks if there's a depression or inflation. So it's an effective hedge in your portfolio against chaos, against

war, against inflation, things like this. But how should you think about adding this controversial investment to your portfolio? We'll talk with Wall Street Journal reporter Aaron Back about gold, its history, and its sister commodity, silver. That's after the break. Ad Council and its pre-diabetes awareness partners. Investors and historians agree. Americans turn to gold in the midst of financial turbulence. Wall Street Journal reporter, Aaron Back joins me. Aaron, in your story, you described gold as a bit of a controversial investment.

Why does it have so many supporters and detractors? Gold's performance over time is very uneven. And the case against gold was made famously by Warren Buffett, where he said if you bought all the gold in the world, it would just sit there as a cube and not do anything. Whereas if you took the same amount of money and invested it in companies or even farmland, those would produce things over time, they would change,

they would benefit from technological advancement. And this is true over the very long run. If you look at say a 20 year time horizon, stocks do much, much, much better than gold. However, if you shrink that to just 10 years, it's not in frequency that gold can have a 10 year outperformance over stocks. And it tends to be when everything else is going wrong. So what happened in the 1970s happened in the 2000s when we had the financial crisis, bubble burst, Iraq war, and it's happening again this decade.

When of course we've had COVID trade wars, all of this. So gold tends to help people do well when everything else is falling apart and when stocks are doing poorly. And what does the other side say? If I were to tell you you're saving for retirement 30 years from now, you should not put that in gold. You should put it in stocks. For the reason you described.

Right, it makes sense to have some of your portfolio in gold if you need your money in the next 10 years because gold will do much, much better than stocks if there's a depression or inflation or something like this So it's an effective hedge in your portfolio Against chaos against war against inflation things like this a lot of people say it's rational to have Some money in gold to hedge against these big risks and why are gold prices soaring now? Well, you obviously have fear of inflation.

Inflation tends to be good for gold. You also have fear of a more general nature. You have fear that there's political instability in the United States. You have fear that the role of the US dollar is being undermined. Let's say you had to take your money out of the United States in a hurry and there were capital controls. Hard assets like precious metals, diamonds, things like that become more attractive in those types of situations.

When you say capital controls, what do you mean by that? If I have my money in a bank account, it's subject to all sorts of controls on what I can do with it, transfer it out of the country. That's one reason why hard assets like diamond, gold, they have this attraction. They're not political. Your dollars or your treasury bonds, those are US assets, they carry a US passport, gold,

silver, diamonds, platinum. Part of the reason they are attractive is they could have a buyer anywhere in the world. It's a similar case for Bitcoin, but basically gold is like nature's Bitcoin. Okay. Okay. I love that in the world. It's a similar case for Bitcoin, but basically gold is like nature's Bitcoin. Okay. Okay. I love that by the way. We're going to transfer now to silver. Yes. Silver, you report, also tends to pick up when gold does. And over the past year, you

reported that silver has risen around 23%, which is less than gold, though still beating the S&P 500's return over the same period. Why are these two commodities, gold and silver, linked this way? Gold and silver are always eternally linked in the imagination. But what people like to look at is the ratio of gold prices to silver prices.

So over the last 30 years, that's averaged around 68. Now, when that ratio gets very high, i.e. gold gets much more expensive than silver per ounce, that tends to be a buying signal for silver. So last week, gold hit an all-time high, and the ratio of gold prices to silver prices went over 100, which has only happened very rarely. The last time that happened was in March of 2020

during the COVID panic. Silver rallied, it went up 78% over the next 12 months. Gold hardly went up at all. Whenever gold gets much more expensive than silver, it tends to be a buying signal for silver, and that's the case right now. And you also wrote that silver has a split personality. What did you mean by that? So unlike gold, which is kind of just a pure luxury, silver has a lot of industrial uses. It's used in electronics, it's used in solar panels. It has these practical real life applications.

When everything's going bad, there's less demand for silver in the industrial economy. So in that sense, it's less of a pure hedge against things going wrong, but it's also a precious metal. So it also has some of those attractions I was talking about earlier for gold being inflation proof, not belonging to any one country's financial system.

All these things apply to silver as well. So it has the split personality. It is both a precious metal and an industrial commodity. If you want a hedge against things truly going bad, gold beats silver. But silver tends to do well when we're just kind of coming out of a bad situation.

So for example, during the financial crisis, gold outperformed silver initially. But in the year or two after the financial crisis, silver did better. So the bottom line is that gold tends to rally when things get really bad, silver tends to follow when things are starting to get a little better. And in the history of the stock market, we've seen this pattern with gold and silver popular when the market is volatile. Some could even say reliable. Can we expect to see that pattern repeat now?

The pattern with gold has already repeated. Gold hit an all-time high last week. Now the question is, will that continue? Well, it kind of depends. If you're one who thinks the trade wars are basically over and everything's gonna be fine now, then you wouldn't necessarily want to be in gold. The classic example is in the 80s and 90s, gold was garbage, basically. And those happened to be two decades when stocks did historically amazingly well.

The more pessimistic you are, the more likely you are to want to have gold in your portfolio. That's WSJ reporter Aaron Back. And that's it for your money briefing. We'll be back tomorrow with WSJ's Heather Hadden to discuss the rising trend of skimping out on tipping. This episode was produced by Zoe Kolkin with supervising producer Melanie Roy. I'm Julia Carpenter for The Wall Street Journal. Thanks for listening.