Gold and Silver Prices Surge Amid Geopolitical Uncertainty
Gold prices have increased for two consecutive days, surpassing the $5,000 mark per ounce, driven by rising geopolitical tensions and a migration away from sovereign debt and currencies.
On Tuesday, gold bullion climbed up to 1.8%, marking the seventh day of gains, while silver saw an impressive increase of over 9%. This month has witnessed robust investment demand, pushing silver up 57% since January. Gold and platinum have also experienced notable gains.
In recent times, there has been a noticeable trend of investors withdrawing from currencies and U.S. Treasuries, a shift often referred to as downgrade trading. Concerns about Japan’s bond market, particularly amid massive fiscal spending, have added to these worries. Meanwhile, speculation about potential U.S. interventions to support the yen has had the side effect of making precious metals more affordable for many investors.
The actions of the Trump administration, such as the controversial annexation of Greenland, military threats against Venezuela, and new challenges to the Federal Reserve’s independence, have unsettled the markets.
On Sunday, the president threatened to increase tariffs on South Korean imports due to the country’s parliament’s inaction on a trade agreement. This warning was preceded by a threat to impose 100% tariffs on Canada if a trade deal with China comes to fruition.
According to Amundi SA, which is Europe’s largest asset manager, many investors are scaling back on dollar-denominated assets in favor of gold as the United States seems to be increasingly at odds with other nations.
“Long-term, gold offers solid protection against devaluation and is an effective way to maintain purchasing power,” noted Vincent Mortier, Amundi’s chief investment officer, in a Bloomberg TV interview.
The growing preference for gold is also evident in recent data, with options traders preparing for continued price increases in a market where confidence in a bull run is low. The implied volatility for Comex futures has risen to levels not seen since the COVID-19 pandemic peak in March 2020, and the volatility for State Street’s SPDR Gold Shares, the largest bullion-backed ETF, has also significantly increased.
Deutsche Bank analysts remarked on Monday that gold’s ongoing rally suggests persistent investment motivations, including larger reserve allocations and increased interest in non-dollar and tangible assets, with a new forecast of $6,000 per ounce by year’s end.
Silver Sees Unprecedented Demand
In parallel, silver is on the brink of hitting its all-time high of $117.71, a milestone reached in the previous session. This surge represents the largest intraday gain since the financial crisis in 2008, driven by strong physical demand and speculative interest within a relatively tight market. Indications suggest that Chinese buyers are leading the trend.
The considerable volatility in silver prices has resulted in substantial trading activity at the iShares Silver Trust, which is the largest silver-backed ETF. On Monday, trading volume reached around $40 billion, comparable to the State Street SPDR S&P 500 ETF and well above NVIDIA’s $23 billion and Tesla’s $22 billion in sales. Just months ago, average daily trading in silver ETFs hovered around $2 billion, increasing to roughly $10 billion by late December.
As of 12:14 p.m. in London, gold was up 1.5% at $5,081.17 per ounce, while silver rose 7.8% to $111.89. Platinum and palladium also recorded gains of 3.3% and 3.9%, respectively. In contrast, the Bloomberg Dollar Spot Index fell by 0.1%.
