New Delhi, Feb. 27 -- As metals rally in rare synchrony, markets may be signalling stress beneath the surface of global growth
Metals are doing something they typically do only near turning points. Copper is pricing durable growth. Gold is pricing institutional anxiety. Silver is attempting to price both at once.
The popular explanations-electrification, AI, defence spending, and the energy transition-sound tidy but are incomplete. They justify strength in individual metals, not a synchronised surge of this intensity.
A market can price growth, or it can price anxiety. It struggles to price both for long. Yet that is precisely what is happening. The more important question is not how high metals have gone, but what their synchrony reveals about the state of the system beneath them.
Figure: Synchronous movements of metals in 2008 prior to the crisis. Note the vertical surge in silver just before the fall.
When growth optimism and monetary anxiety converge
Copper is a growth metal. It rises when investors believe capital expenditure will compound and industrial demand will remain firm. Gold is a monetary metal. It rises when confidence in currencies, policy credibility, or the stability of financial stability weakens. When both rise together, markets are hedging two incompatible futures.
The data confirms this. Copper holds above $12,900 per tonne, signalling expansion pricing. Gold has risen more than 20 per cent in three months even as real rates and insurance pricing have tightened.
Silver has been the most revealing. It surged above $120 in late January, crashed 30 per cent in a single day, and still trades near $90. Realised volatility is running at approximately 45 per cent. That kind of movement is not driven by physical demand. It reflects leveraged positioning being stress-tested.
Silver as the stress signal Silver sits at the fault line between industry and money. It is an input into electronics, solar panels and electrification, yet it also functions as a monetary hedge. That dual identity makes it unusually sensitive to liquidity conditions. Historically, silver is where late-cycle stress surfaces first. The structural story is real: five consecutive years of physical deficit, new Chinese export restrictions, and solar and electrification demand outpacing mine supply. These fundamentals are durable.
But fundamentals alone do not produce a near-vertical spike followed by a 30 per cent single-day collapse. That pattern is driven by positioning. In late-cycle phases, as volatility rises and funding conditions tighten, leveraged capital rotates into assets that appear both tangible and liquid. Silver becomes the preferred expression.
The result is an overshoot that is narrow, steep and fragile. When it reverses, it does so abruptly, because the marginal buyer was speculative, not fundamental.
This distinction is crucial. What makes metals fragile at these levels is the financialised froth layered on top of structural demand. The danger is not that prices are high but that the marginal flow pushing them higher is leveraged, momentum-driven, and concentrated.
The 2008 echo and its limits This configuration has precedent. In the months preceding the 2008 crisis, gold, silver, and copper all rallied together. Growth narratives persisted even as stress accumulated beneath the surface.
Silver formed a characteristic double-top with a sharp final surge just before liquidity fractured. When funding markets seized, copper collapsed as growth expectations reset. Silver fell even more sharply, losing support from both its industrial and monetary roles. Gold initially declined as investors liquidated assets to meet margin calls before stabilising once forced selling passed.
Today's supply constraints are tighter, central bank accumulation is strategic rather than speculative, and industrial demand drivers are more entrenched than the housing-led cycle of the mid-2000s. The structural bull case is stronger.
Yet vulnerability at the margin may be greater. Commodity markets are far more financialised than in 2008. Exchange-traded products, futures, and cross-asset funds dominate marginal flows. Physical supply and demand do not reprice an entire metals complex in days. Financial positioning does.
This dynamic was evident after the recent correction. On February 2, the CME raised margin requirements on COMEX gold futures from 6 to 8 per cent and on silver futures from 11 to 15 per cent, emergency hikes triggered by volatility. Higher margins forced leveraged participants to liquidate positions they could no longer fund, deepening the decline. By the time institutional buyers re-entered, speculative positioning had already been reset.
The structural floor under metals may be higher than in 2008. The distance between that floor and current prices, however, is largely leverage.
What this means for India Indian households hold an estimated 25,000 tonnes of gold, more than any central bank. In 2025, silver followed, with record MCX volumes and surging physical imports. India produces virtually none domestically.
Here, financialised fragility meets household balance sheets. The wealth effect has been extraordinary. Asset values in gold and silver have rarely risen this rapidly in tandem. Rising prices draw retail capital deeper into a rally increasingly sustained by leverage.
But leverage-driven wealth effects reverse just as sharply. When leverage breaks, as it did on January 30, losses concentrate among households least equipped to absorb them.
On the industrial side, copper-intensive sectors such as renewables, grid expansion, and electric vehicles, face margin pressure precisely as policy demands rapid deployment. Higher metal prices feed into imported inflation and widen the current account deficit.
There is, however, an uncomfortable silver lining. If repricing occurs, the same correction that damages household portfolios could compress input costs for sectors India most needs to scale. The challenge is that India cannot benefit from reversal without first absorbing the shock.
Volatility as information Metals sit at the intersection of the real economy and the financial system. They often move before stress becomes visible in credit spreads, funding markets or official data.
When copper and gold rise together, markets are signalling uncertainty rather than conviction. When silver accelerates sharply and volatility spikes, markets are expressing urgency. The structural floor may hold. But the margin between that floor and current prices is largely leveraged liquidity.
And liquidity, markets are periodically reminded, can disappear far faster than confidence.
About the author: Vidhu Shekhar is an Associate Professor of Finance and Accounting at the S.P. Jain Institute of Management & Research (SPJIMR).
Published by HT Digital Content Services with permission from TechCircle.