Analysis: Behind the price rise of gold and silver

It’s been called a perfect storm — the tempest behind the rise of gold and silver prices. But what’s behind it?

May 20 marked an all-time high price for gold, at a spot price of $2,435.96 per ounce. Gold futures were higher at $2,438.50.

Spot silver also rose to $32.17, an over 11-year high.

For comparison, consider the price of gold over the past couple decades. After a June 2001 average of $271.19 per ounce, the price of gold began to increase, sometimes dramatically, with annual percentage changes of 20% to 30% in some years of the 2000s.

The second decade of the 2000s saw even more price volatility, but since 2019, gold prices have seemingly jumped the shark — cruising through the pandemic years with only a relative bump downward. That kind of staying power amid a very uncertain time represents, to many investors and collectors, the utility of gold and silver. They maintain value especially amid dire economic conditions.

Recently, 2023 ended with gold at a record $1,943 per ounce, and continues to display an ability to stay high.

Silver generally follows the strong magnetic pull of its powerful cousin, gold. For collectors, it used to be possible, just a few years back, to buy five silver American Eagles for $100. Now, according to Diamond and Gold Buyers of Albuquerque, a store on Menaul Boulevard, buying five Eagles would run about $175.

Why the rise?

Experts give several reasons behind the price spikes. There has always been a general belief that the outbreak of major wars will produce a spike in gold and silver prices, usually because investors are looking for safer havens than paper money, which may fluctuate in price in war scenarios.

Right now, there are two major wars on the global scene and several others playing out. Threats and escalations can produce “conflict” spikes in metals prices. Even the death of Iranian President Ebrahim Raisi can do so, but the current surge has been building steadily, seemingly without crisis factors as catalysts.

There’s yet another consideration experts have raised. Countries, including China and India, may be buying more gold. India has also been increasing its silver-buying in an apparent attempt to shore up its lithium-ion battery and solar power production. SD Bullion reported a record 70.7 million ounces of silver were purchased by India in February this year.

According to CNN in an April 9 report, “The People’s Bank of China bought gold for the 17th straight month in March, adding 160,000 ounces to bring reserves to 72.74 million troy ounces of gold.”

Those moves, according to investment firm UBS, have to do with a desire to move away from the U.S. dollar amid geopolitical uncertainty. Those moves also help Chinese investors who are facing serious downturns in property values. Gold provides a hedge against downturns and inflation.

India and Turkey are among other central banks increasing gold reserves, according to reports. Again, some nations may be trying to reduce their vulnerability to U.S. sanctions that involve U.S. dollars, a CNN analysis said, concluding that such central bank buying is what drove up the price of gold.

Rate cuts and hype

As with any market performer, hype may drift into decision-making, and gold and silver are no exceptions. Hype, though it’s difficult to quantify, can add buyers, push prices and extend runs.

Coming rate cuts may also be scaring investors. The Federal Reserve rate cuts make gold seem more attractive because the price of gold isn’t affected by rising or falling interest rates, experts say. Rather, its price is affected more so by supply and demand.

Ultimately, analysts say investor behavior is a major factor in the precious metals price spike. Gold company Kitco Metals says gold prices may be benefiting from U.S.-China trade tensions and rising India demand. Indeed, there has been a recent increase in trade tariff threats between the U.S. and China, similar to the Trump administration’s trade squabbles with China.

Analysts add that a weaker U.S. dollar and a decline in Treasury yields likely propelled the most recent gold rally.

How long will it last?

The forecast for gold and silver prices is for more of the same. JPMorgan analysts say gold prices should keep on rising and peak late in 2025. Still, they warn to be wary of going all in on a gold investment, preferring a more logical diversification of an investment portfolio. The typical recommendation is no more than 10% of an investment portfolio should be dedicated to gold.

For individual collectors, gathering physical gold and silver coin and bullion, rather than an on-paper percentage of a portfolio, the excitement is high, as a long-predicted move by precious metals appears to be underway.

Some are selling to good profits, others no doubt see the price moves as a good reason to buy some more. Then there’s the type who’s been collecting for a while, and now enjoys the price spike. Their message? “I told you so.”