Trump's Venga Economics vs. Depression-Price Silver
Tuesday, 4/08/2025 17:16
Gold/Silver Ratio just topped 100 recession level...
NOBODY does tariffs bigger or better than Donald J.Trump,
writes Adrian Ash in this note sent to BullionVault users last Friday, updated (where needed) for today.
Trump's trade tax economics are so big, so beautiful...
...albeit (and wisely) leaving
gold and silver bullion exempt from the 'Liberation Day' tariffs...
...that foreign governments are speechless. Almost.
"Incomprehensible," say Switzerland and Germany.
"Bullying," says China.
"Extremely grave," says Japan.
"Irrelevant,"
says Russia.
As for business and media, "It's a lot to try and absorb,"
says one UK exporter.
"It's an astonishing act of self-harm," says the
Financial Times (reprising what it said about the UK's Brexit vote and fretting over the same trade-led recession if not depression).
"They used ChatGPT!" squeals another economics specialist about
how Team Trump 2.0 arrived at the figures on that big piece of card he waved at Wednesday's press conference.
But the Prez himself?
"The markets are going to boom, stocks are going to boom, the country is going to boom," said a defiant Trump late Thursday, pretty much quoting the Vengaboys, as US tech stocks made their worst 1-day crash since summer 2020's Covid Crisis.
"We're feeling good,"
added his VP J.D.Vance the same day.
"It could be worse in the markets."
And lo! It is.
Look, gold isn't immune to Trump's tariff crash in the markets.
If the plunge in risk assets continues (Monday and Tuesday's bounce aside) there's a chance that the price of gold will fall further...
...like it did in the first flush of the Covid Catastrophe in March 2020...
...or like it really did (in Dollar terms) during
the Lehmans phase of the global financial crisis in 2008.
That's because, as traders liquidate winning positions to cover losses elsewhere, gold will yet again stand out as a big winning position.
But as things stand, gold has lost barely 1% in London's bullion market this week from last Friday's record week-end high.
The contrast with stocks, energy and base metals suggests that gold's safe haven appeal is intact. The contrast with silver also says that strategic gold buying by central banks and other big players has most likely continued as Trump's tariff threats become reality...
...because sovereign investment is something the more industrially-useful precious metal lacks.
Indeed, silver has crashed to Depression-era lows against gold, with the ratio of gold to silver prices peaking since Trump's Rose Garden announcement above 100...
...a level
last seen (briefly) during the Covid Crash, and only then for just the second time since the early 1940s, back when the USA was crawling out of a decade-long recession while most of the rest of the world was
throwing itself into total war.
Third time's a charm?
Now averaging 90.0 ounces of silver so far in 2025, the price of gold has topped Covid's 2020 economic depression annual average of 89.1, as well as the global recession of 1991's annual average of 89.3, when the ratio touched 100 for just 1 day.
That speaks to just how awful the economic outlook has become.
Useful stuff? Yours!
Useless safe haven? Buy! Or at least, hold.
But this spike in
the Gold-Silver Ratio is also, so far, driving a surge in silver demand among contrarian investors.
Net purchases by BullionVault users have now totalled over 12 tonnes inside 6 days since Trump unveiled his big, beautiful tariffs.
That reverses 90% of last month's net selling, when the Gold/Silver Ratio averaged just below 90. On a daily basis, it's running at 2/3rds the pace of March 2020, when BullionVault users hoovered up a record 96.9 tonnes of
the indispensable metal in 1 month.
Meanwhile, and like gold, silver has seen the price gap in New York futures over London physical collapse after
the White House decided to exempt bullion from the Liberation Day tariffs, just like everyone (should have) expected.
But while
the incentive for shipping yet more gold into US Comex warehouses has now dipped below $10 on the most-active June contract...
...around half the level you'd expect here in early April...
...the gap between London silver and New York's May contract has evaporated entirely, running at precisely 0 cents per ounce as the weekend began and actually going negative today.
It's important to remember: US investment demand didn't drive the flood of bullion into US storage, now totalling well over 4 years' worth of total US gold demand and 4 years' of US industrial silver demand.
It was simply a financial-market arbitrage, spurred by the threat of trade tariffs on bullion and now erased by the exemption for gold and silver bars listed in Wednesday's Presidential action.
To date, it looks like gold is holding firm as that dislocation unwinds. Whereas silver is getting badly hit by speculators rushing to close out their bullish bets on New York futures.
So the opportunity in silver, in other words, may have longer to run. If it turns out to be an opportunity at all, that is...
...rather than Trump's
Voodoo
Vengaboy Economics marking the start of something even uglier than the Great Depression or the cataclysm of Covid.
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