A couple of months ago, Germany’s finance ministry took a remarkable step: it cancelled the long-planned Christmas issuance of a “Three Wise Men” commemorative silver coin, and a second (less festive) silver token celebrating monorails.

The reason? Silver prices surged in October to hit $53 per ounce, a level where “the material value of the German €20 and €25 silver coins currently exceeds their respective face value by a significant margin,” as the finance ministry explained. In plain English: issuing those coins no longer made economic sense.

And since then, silver prices have continued to soar. Indeed on Wednesday, the silver price hit $63.86 per ounce — nearly double its level a year ago — after the Federal Reserve trimmed rates by 25 basis points.

That easily eclipses this year’s nearly 60 per cent rally in gold prices — never mind that it is gold which has grabbed all the attention. Indeed, silver’s price rise has been so “parabolic”, to use the trading jargon, that a rally like this has only been seen twice before in recent history: in the late 1970s (amid an oil and inflation shock) and in 2008 (during the global financial crisis).

And what is noteworthy this time is that the surge in silver prices has not occurred alongside an equity or bond market collapse; or not yet. At best, this makes the pattern unusual — and, at worst, potentially ominous.

What explains this? The answer lies in a mix of fear and greed, along with rising levels of financialisation. To start with greed: in the last year, industrial demand for silver has risen steadily, particularly from sectors such as electric vehicles and computing chips. If history is a guide, this will eventually lead to an expansion in supply (ie more mining).

But since this cannot be implemented quickly, supply and demand are currently mismatched. And this imbalance has become doubly intense because the White House recently designated silver as a strategic commodity, sparking fears of looming tariffs.

So there has been stockpiling inside America. This in turn has exacerbated shortages elsewhere, creating funky price gaps between London and New York. And — unsurprisingly — there are rumours that savvy financiers have been exploiting this gap.

If so, that presents a pale echo of the speculative dislocation — ie, price distortions caused by aggressive financiers trying to book profits — that erupted in 1980, when a fraternal trading team known as the Hunt brothers unleashed an (in)famous squeeze in silver markets.

There is also a third factor behind the surge in silver prices; retail mania is rising, as the Bank for International Settlements noted this week. Most notably, a sense of “Fomo” — or fear of missing out — is prompting investors to gamble on sectors linked to artificial intelligence, alongside gold or crypto. And, as prices have jumped for those assets, some investors now seem to be turning to silver too, not least because they realise that silver has real-world uses — unlike many other speculative assets. This has made it doubly attractive. Silver, if you like, is the new gold.

Then there is fear. With the Fed now having cut rates three times this year, even as inflation exceeds its 2 per cent target, there is rising concern about “fiscal dominance” — ie that governments will force central banks to cut rates to make it easier to service their ever-swelling debt.

“It is all inflationary,” warned Steven Blitz, chief US economist of TD Lombard, in an email to clients this week, noting that in addition to rate cuts, the Fed also pledged this week to restart purchases of treasuries.

This has pushed up long-term bond yields in the US — and elsewhere — in 2025, even as short-term rates fall. “This pattern of rising long-term interest rates is highly unusual when we look at historical reaction during [past] Fed cutting cycles,” notes Torsten Sløk, chief economist at Apollo.

It is also leading some investors to embrace bullion as a “debasement trade”, that is, a hedge against the risk that inflation or even default erodes the value of fiat currencies.

Some, such as US Treasury secretary Scott Bessent, argue these concerns are nonsense. Last week he issued a chirpy social media post featuring the cartoon character Franklin the Turtle, urging US savers to buy more Treasuries precisely because he thinks they are a reliable store of value. 

And, as financial historians might note, there is certainly no guarantee that silver — or gold — is a more reliable asset. On the contrary, silver prices have been so volatile in the past, because the market is so thin, that traders quip that the precious metal is “the widow maker”, because it can produce big losses. Those Hunt brothers are a case in point: after the dramatic 1980 price rally, prices crashed — wiping them out.

That could happen again. But right now, fear and greed remain rife — and are being intensified by uncertainty about what US President Donald Trump might do to the Federal Reserve or with tariffs. In that sense, then, the abortive Christmas coin is a potent sign of our times, where exuberance and unease are now entwined in markets — albeit not quite the “commemoration” that the German finance ministry wanted.

gillian.tett@ft.com