Rising and shining: Global uncertainty is pushing precious metal prices

Precious metals — through 2025 — outperformed most financial assets. Gold and silver continue to rally as the calendar year enters its final quarter. In dollar (USD) terms, gold is up 48 per cent and silver has done even better with a return of over 65 per cent since January. Both metals have hit record levels. Well into the festival season, which is traditionally the time to buy precious metals, Indian households are focused on the prospects of these two metals. Many would be wondering whether they should confine their purchases to token levels at these elevated prices. However, there are reasons to believe that the rally will continue, though the pace would be difficult to predict. Several factors are influencing global price trends in gold and silver. For years, gold and silver have been considered stores of value, which can beat inflation and provide protection in an uncertain economic environment. Hence, there is always investor interest in these metals. 

One factor driving prices is currency-market volatility. A weaker USD, in particular, is often the trigger for bull runs — international prices of both metals are USD-denominated. Another factor is geopolitical tensions. Precious metals have a fairly liquid market and are relatively easy to store and carry in the case of war, floods, and other disruptions. This ease of mobility has been enhanced in the modern era by exchange-traded funds — digital instruments that closely track the prices of metals. As it happens, uncertainties on different fronts are pushing up prices of gold and silver. The tariff war launched by the Donald Trump administration has not only hobbled global growth prospects, it can also push up inflation, particularly in the United States (US). It has also led to currency volatility as global markets struggle to discount the uncertainties created by US tariff demands. The USD has fallen by over 10 per cent since January against a basket of currencies, imparting an upward trajectory to prices of gold and silver. The rupee has also lost ground against the dollar, even as the dollar has lost ground globally, amplifying domestic prices even more. 

Geopolitical tensions are also high. The Gaza War will complete two years this week. The Russia-Ukraine War is into its fourth year. The US has attacked Venezuelan shipping, leading to tensions with Central and South American nations. Ties between the US and its allies, such as Japan and South Korea, have been stressed by tariff brinkmanship and are a risk to the stability of the global order. Put it all together, the bull run in gold and silver looks likely to continue until there are signs of strong global economic growth, tariff clarity, and easing geopolitical tensions. Several central banks have been buying gold in large quantities over the past few years to keep their reserves safe, which is also a sign of the declining confidence in the global economic order.

Aside from these factors, investors must also consider the industrial use of gold and silver. Silver (like platinum, which has gone up 84 per cent since January) has significant uses in multiple industries, ranging from electronics to renewable energy and water purification, whereas gold has little utility outside the jewellery industry.  This could result in a divergence of trading trends.