Oil and silver prices diverged to a rare and extreme degree this week, a potentially foreboding development that has often accompanied volatility and uncertainty across global markets.
Traders and market participants witnessed silver futures grab an uncharted $60-handle, while crude oil futures dove, making an ounce of silver worth more than a barrel of crude oil for the first time since April 20, 2020 – a time when the world was riddled by COVID-19.
Prior to that, it occurred on April 28, 2011, which was in the final stages of a blow-off top in silver futures. The peak occurred on the next trading day and was followed by a crash, ending a year-long bull run.
However, the 1980 Silver Bubble holds the record to date. Over the course of the year, silver held a premium to crude 156 out of 252 trading days, when a handful of traders attempted to corner the silver market. “Silver Thursday” on March 27, 1980, ended the run after futures plunged 50% in a single day, marking the largest one-day decline in commodity history at the time.
The main difference between today and 1980 are equities. Inflation, high interest rates and a weakening economy were a weight on equities, while silver prices rose more than 300% in 1980. Silver Thursday marked a historical inflection point for equities, which were boosted by forced long liquidation in commodities.
What’s in store
While it’s hard to say how the chips will fall given the current market structure, history certainly has reputation for repeating itself, and it indicates something monumental may be lurking in the shadows. A correction in precious metals seems likely, with silver notching a near 100% gain annually, while gold gains trail at around 57% - and is the strongest bull market since the late 1970’s.
But that strength has emerged amid a “perfect storm” of macroeconomic, geopolitical and structural factors as traders look to secure safe-haven assets amid a landscape of elevated uncertainty. However, silver’s run has been amplified by industrial shortages.
About 50% of silver use is industrial, fueled by green tech in electric vehicles and AI infrastructure, while tariffs on imports have further tightened supplies. This comes as global mine production has declined more than 10% from the 2020 peak.
While many analysts anticipate the bull market to extend into 2026, several risks loom. A hawkish pivot, rebound in the U.S. dollar or resolved geopolitics could spark a correction.
Oil glut as demand suffers
A major uptick in oil supplies, up 3 million barrels per day (bpd) since late 2024, combined with weak demand has been the key weight on the crude market, while tariffs and trade tensions have added fuel to the fire.
Many analysts have a bearish outlook for crude into 2026, unless OPEC+ puts the brakes on output. Escalated sanctions on Russia or improved demand could also trigger a turnabout.
If the slide continues, consumers will undoubtedly benefit at the gas pump, though cheap oil prices run the risk of reduced drilling as prices dip below breakeven for producers.
Implications for ag futures
The ongoing run in precious metals is indicative of heightened inflation expectations across the marketplace, a weaker dollar and persistent geopolitical risks, which have a mixed effect on the grain and soy complexes.
A weaker dollar bodes well for commodities as it boosts export demand, but sticky inflation and trade unknowns mean agricultural input prices are likely to remain elevated. A weaker dollar contributes to that inflation as it makes imports more expensive.
Ample global supply has kept grain and soy prices subdued for some time, while the rally in precious metals underscores traders’ powerful appetite for safe-haven assets. Ags have not made the cut in those efforts to date, though speculative longs could return in full force if a supply disruption develops.