Gold extended its relentless surge on Thursday, breaking through $5,500 per ounce to set another historic high. After recording gains of over 145% in 2025, silver surpassed $117 per ounce for the first time on Thursday; year-to-date, this white metal has climbed nearly 65%. This powerful rally has lifted the entire precious metals complex, from platinum to palladium, and has even spilled over into base metals.
"We have been forecasting a surge in gold prices since the beginning of last year," stated Ed Yardeni, President of Yardeni Research. However, he added, "But this has evolved into a surge in the prices of all precious metals, many base metals, and rare earth minerals."
Analysts attribute the demand to investors seeking shelter from a multitude of risks, including geopolitical tensions, ballooning government debt, and uncertainty surrounding the outlook for interest rates and currencies. Persistent buying by central banks has provided a foundation for gold, while expectations for eventual monetary easing have also enhanced the appeal of non-yielding assets compared to safe-haven U.S. Treasuries.
Silver has magnified this upward trend, with its role as an industrial metal offering additional support. Demand linked to solar energy, electronics, and electrification trends has added upward momentum in a market already constrained by supply limitations.
"Given the unprecedented volatility, I would mark the precious metals market as 'dysfunctional'," Nicky Shiels of MKS PAMP told CNBC.
Analysts indicate that price drivers are now less tied to physical supply and demand and more influenced by erratic liquidity flows, which has resulted in extreme price volatility and repeated disconnections from fundamentals.
"The precious metals complex has surged over the last two months and is tactically overbought," she further commented.
Maximilian Tomei, CEO and Co-Chief Investment Officer of Galena Asset Management, echoed this sentiment, suggesting that recent price movements have little correlation with underlying fundamentals.
"What you're seeing in the metals market today isn't necessarily fundamental demand for the metal itself. This is volatility driven by a weakening of the currency of account (the denominator), right?" Tomei said. "This is important because gold is somewhat like a currency. If the currency you use to price it weakens, then the gold price rises."
The U.S. dollar index, which measures the greenback's strength against a basket of currencies, has fallen nearly 11% over the past 12 months.
Nevertheless, Tomei cautioned that while some fundamental demand for precious metals is a contributing factor to the recent gains, it alone is insufficient to justify such a dramatic increase.
"Fundamentals cannot explain a commodity rising 200%," he stated. "The way silver is behaving is exaggerated; it's a series of disconnects. The market is broken." Tomei added that another potential driver for precious metals is the excess liquidity flooding global markets.
As asset prices increase, investors can borrow more against their portfolios via margin loans and other, often less visible, forms of leverage, effectively creating new money within the financial system, he explained. When equity valuations become excessively high, some of this liquidity seeks other destinations. In Tomei's view, metals like gold and silver are increasingly becoming "parking lots" for such capital, not due to a massive shift in fundamentals, but because the liquidity needs a place to reside.
Some analysts point out that, against a backdrop of ever-expanding debt burdens, government bonds have lost some of their traditional appeal as safe-haven assets, as evidenced by recent global bond sell-offs.
Detached from Reality?
The ultimate result is exaggerated price movements, particularly in smaller precious metals markets, where relatively modest inflows can push prices significantly higher, making the rally feel disconnected from traditional supply and demand dynamics.
Similarly, Guy Wolf, Global Head of Market Analytics at the global financial services platform Marex, noted that price action in some markets within the precious metals sector has become increasingly distorted. Markets like silver and platinum are a fraction of the size of gold or major stock indices like the S&P 500, meaning the recent influx of speculative capital has had a disproportionately large impact on prices.
He pointed out that capacity constraints mean physical metal supply cannot ramp up quickly to meet surging demand, leading to prices that have "completely detached from levels supported by strong physical demand." This dynamic could reverse just as sharply once speculators begin taking profits and liquidity dries up.
However, not everyone agrees that price discovery—the process of establishing a market price that matches supply and demand for a commodity—has completely broken down. Gautam Varma, Managing Director at strategic advisory firm V2 Ventures, avoided labeling the precious metals market "dysfunctional" but noted the rally reflects the growing influence of speculative capital.
"You can see there is more speculative capital involved, and this speculative capital may be entering for reasons other than fundamental supply and demand."
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