The year 2025 has delivered a historic performance for precious metals, with gold and silver posting extraordinary gains that have captured global investor attention. As the year concludes, the focus shifts to whether this momentum can sustain into 2026 and what forces will drive the market.
The Spectacular 2025 Rally: A Look Back
Spot gold, currently trading near $4487 per ounce, has gained approximately 71% year-to-date. This makes 2025 its second-best annual performance on record, trailing only the 126% surge witnessed in 1979. Silver, however, has stolen the show with an even more impressive rally. The grey metal, priced around $72.33, has skyrocketed by 150% since the start of the year.
This powerful rally is not occurring in a vacuum. Experts draw a parallel to the 1970s boom, a period also characterized by high inflation, geopolitical strife, and a shifting monetary order. The current surge is underpinned by a potent mix of fundamental drivers including intense geopolitical tensions, concerns over the US dollar's reserve currency status, and rampant fiscal spending leading to currency debasement.
Macroeconomic Winds Filling the Sails
The global economic backdrop presents a compelling case for hard assets. In the United States, a fiscal deficit of 6.1% of GDP ($1.9 trillion) far exceeds the fifty-year average of 3.8%. With the debt-to-GDP ratio already at 100% and projected to hit 118% by 2035, the path is unsustainable. The enormous net interest payment, expected to surpass defense spending in 2025, poses a severe risk to economic stability.
"Mounting risks to the US Dollar and US treasuries have broken gold's traditional relationship with the dollar and yields," analysts note. This environment has triggered unprecedented gold buying by central banks globally, which have been net purchasers since 2009. Gold's share in global foreign exchange reserves is now around 28%, a near three-decade high, and reportedly exceeds holdings of US Treasuries for the first time since 1996.
Geopolitical friction adds further fuel. The ongoing war in Ukraine, volatility in the Middle East, US-China strategic competition, and trade tensions under policies like "America First" are embedding a persistent risk premium in gold prices. Furthermore, political pressure on the US Federal Reserve, questioning its independence, alongside a weakening US Dollar Index (down 10% YTD), creates a perfect storm for precious metals.
Silver Steps Out of Gold's Shadow
While often viewed as gold's poorer cousin, silver has dramatically outperformed in 2025, powered by its dual role as a monetary and industrial metal. The gold/silver ratio has plummeted from 105 in April to 62, indicating silver is catching up fast.
Its fundamentals are robust. Record industrial demand, driven by the green energy transition, artificial intelligence, nuclear reactors, and defense technologies, coincides with a physical supply crunch. The London Bullion Market Association (LBMA) has seen tightness, with the one-month lease rate hitting 6%, far above the historical 0.3%-0.5% range. The market is in its fifth consecutive year of deficit, a trend expected to continue in 2026.
Investment flows mirror this strength. Global silver ETF holdings have risen 21% year-to-date to about 871 million ounces, with net inflows the strongest since 2020.
Outlook for 2026: What Can Investors Expect?
Looking ahead, the structural case for precious metals remains intact. Praveen Singh, Head of Commodities and Currencies at Mirae Asset ShareKhan, maintains a constructive view. He sets a 2026 target of $5000 for gold, with upside risk, and expects silver to reach the $85-$95 range.
Key factors to watch include the potential for the US Federal Reserve to initiate Yield Curve Control or quantitative easing to manage surging long-term yields and fiscal stress. Expected rate cuts in 2026, potentially more than the two currently forecasted, would also be supportive. The long-term vision is even more bullish, with gold seen eventually moving toward the $6500-$7000 range and silver advancing near $125 by the decade's end.
For investors wondering if they've missed the boat, the analysis suggests it is not too late. Despite the massive rallies, gold ETFs still represent only 2.8% of total global ETF assets under management, and silver ETFs a mere 0.25%. This low ownership, combined with the powerful long-term drivers, indicates significant room for further institutional and retail investment. A systematic, disciplined approach to building exposure can still position portfolios to benefit from the ongoing structural bull market in precious metals.
