Precious metals markets are witnessing a historic rally, with both gold and silver climbing to unprecedented all-time highs. The surge, driven by escalating geopolitical tensions and growing expectations for further interest rate cuts from the United States Federal Reserve, marks a dramatic end to the year for investors.
Metals Rally on Dual Catalysts
Spot silver skyrocketed as much as 3.6 per cent, breaking the symbolic barrier of US$70 per ounce for the first time in history. Meanwhile, gold traded near the US$4,500 per ounce level, extending gains after its most significant single-day jump in over a month. Analysts point to a powerful combination of factors propelling the rally.
Traders are increasingly betting that the Federal Reserve will continue its monetary easing policy into next year, following three consecutive rate cuts. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold and silver, making them more attractive to investors. Simultaneously, rising geopolitical frictions have reignited the metals' traditional role as a safe-haven asset.
Geopolitics and Retail Investors Fuel the Fire
Recent tensions, particularly the U.S. blockade of oil tankers targeting Venezuela's government under President Nicolás Maduro, have added a layer of urgency to the buying. "Geopolitical frictions have re-entered the narrative," noted Ahmad Assiri, a strategist at Pepperstone Group. He explained that such developments bolster background demand for gold as an essential hedge against uncertainty.
A significant driver behind the sustained rally has been robust demand through exchange-traded funds (ETFs). According to World Gold Council data, total holdings in gold-backed ETFs have increased every month this year except May. Notably, holdings in the SPDR Gold Trust, the largest precious-metals ETF, have swelled by more than 20 per cent this year.
However, the nature of this investment has shifted. "Gold ETF inflows over the past few months have been driven largely by retail rather than institutional investors," stated Apoorva Javadekar, chief economist at Muthoot Fincorp Ltd. This trend suggests potential for heightened price volatility, as retail investment flows are typically less stable than institutional money.
Outlook and Spectacular Gains
The scale of the 2025 rally is extraordinary. Gold prices have soared more than two-thirds this year, positioning the metal for its best annual performance since 1979. Silver's ascent has been even more dramatic, with an approximate 140 per cent gain this year. Silver's recent advance was buoyed by speculative inflows and persistent supply chain dislocations following a historic short squeeze in October.
Other factors contributing to the bull run include aggressive global trade policies, concerns over central bank independence, and the so-called "debasement trade," where investors move away from sovereign bonds and fiat currencies fearing erosion from ballooning debt levels.
After a brief retreat from a peak of US$4,381 an ounce in October, bullion has decisively bounced back. Major financial institutions remain bullish on its prospects. Goldman Sachs Group Inc. forecasts a base-case price of US$4,900 per ounce for 2026, citing risks that could push it even higher. With central bank purchases remaining elevated and geopolitical risks simmering, the record-setting rally in precious metals shows few signs of abating as the new year approaches.
