Silver Trumps Oil

 1/2/2025

Silver Trumps Oil

 

Today we look back at the winers and losers of 2025.

The big winner was silver, up 142% for the year. This means one ounce of silver at $70.13 at year end was worth more than one barrel of oil at $57.42. Other than the Covid crash when oil went to near nothing, this has not happened since West Texas Intermediate began trading in 1984.

Gold now trades at $4,351. At that price it could not rise as fast as silver. Gold was up 64% for the year.

There is industrial demand for silver as the cable television ads have squawked for years.  Data centers, medical devices, EVs, and solar panels all require silver. Silver rocketed from $47.50 in early November to nearly double to $84 by year end.  I have heard the industrial arguments for silver. And one fellow suggested gold was rising as it is needed for Nvidia chips.  But there is more going on here.

Gold is 61 times the price of silver. The mood towards investing in metals has gone parabolic. Market Vane’s bullish consensus among silver investors ran to 98% for four consecutive days, an all-time record.

People are exchanging paper dollars for silver and gold. And there is the real story. The US dollar index fell from 110 to 98 by year end. That is a drop of 11%. This also helps explain the 17% rise in the SPX for the year. Stock prices rose to offset the 11% decline in the dollar. Adjusted for the dollar decline, the SPX rose but 6%.  The SPX trads at a rich 31x price earnings ratio, the highest ever.  The Magnificent Seven stocks are off their highs. How long will this tech bubble last?

West Texas Intermediate Crude dropped 20% in 2025. Goldman Sachs estimates oil will average $52 in 2026.  Still Exxon Mobil managed to climb from the April low of $96 to end the year at $120.

From the April low, Halliburton soared from $19 to $29.  Energy service companies are getting into the power generation business. Data centers are looking to nuclear as well as natural gas supplied generation. Caterpillar inked a contract with Joule Capital Partners to power Joule’s Data Center in Utah.  This involves dozens of CAT’s G3520K generators. The generators will be powered by CAT piston engines. This explains how CAT soared from its April low of $275 to $592.

President Trump is on and off again regarding his coveted tariffs. Now he lifts tariffs on upholstered furniture and, yes, Italian pasta. He is having to supplement farmers and ranchers over reduced demand for their products due to his tariffs. This kind of erratic on today off tomorrow slows not grows our economy.

 

Dennis.elam@att.net