GOLD AND SILVER PRICES CONTINUE TO BREAK RECORDS. WHAT DOES THIS MEAN?

Precious metals are rising despite political instability. On October 7, the price of gold surpassed $4,000 a troy ounce for the first time. Two days later, the price of silver surpassed $51 an ounce, nearly reaching its 1980 high.

The latest surge in silver prices occurred amid a shortage of the metal on the London Stock Exchange. The shortage was triggered by news of the United States' intention to impose tariffs on silver imports. This led to an influx of silver into the country and a reduction in the UK's silver reserves available for lending. Along with silver, gold and palladium prices have risen, while platinum, by contrast, has fallen.

Over the past year, the price of silver has gained about 70%, outpacing that of gold, which has increased by only 30%. The rise in the price of precious metals is explained by their traditional status as safe-haven assets, allowing people to preserve wealth during periods of political instability and armed conflict.

The price of precious metals is dependent on the dollar, so investors' attention to silver and gold is driven by the economic situation in the United States. Concerns about a US government shutdown, the overheating of the US stock market, and the possible loss of independence of the Federal Reserve System (Fed), which serves as the regulator, have led to a weakening of the US currency and a rise in precious metal prices (we wrote about the standoff between the US administration and the Fed here).

Interest in silver is initially lower due to its greater volatility compared to gold. Although it has long been an undervalued metal, its current market stability is due to its industrial demand, particularly in the production of electric vehicles, solar panels, and 5G wireless broadband networks. The price of silver is also driven by record-high gold prices, which have been trending for several years, and its high price may discourage some investors.

According to the Silver Institute, demand for the metal will outstrip supply throughout the year. Despite a slight decline in precious metal prices after October's all-time highs, experts predict they will stabilize shortly, and gold prices could surpass the psychological threshold of $5,000 per troy ounce.

The shift by global central banks toward gold as a tool for hedging against systemic risk marks a new reality, in which paper currencies and government bonds are no longer risk-free. Preference is now being given to assets that cannot be frozen or devalued by regulatory intervention. Deutsche Bank estimates that interest in precious metals will persist and that, by 2030, gold and Bitcoin will become the primary central bank reserves.