Gold and silver are hitting new highs as geopolitical tensions rise

London: Gold and silver rose to record highs as escalating geopolitical tensions and bets on further US rate cuts added momentum to the best annual performance in more than four decades. Bullion climbed as much as 1.9% to surpass the previous high of $4,381 an ounce set in October, while silver rose as much as 3.4% to reach $70 an ounce. The move extends a blistering rally that has put both metals firmly on track for their strongest annual performance since 1979.

The latest rise comes as traders bet the Federal Reserve will cut interest rates twice in 2026, while US President Donald Trump is also calling for looser monetary policy. Lower interest rates tend to be a tailwind for precious metals, which don’t pay interest.

Increasing geopolitical tensions also increase the appeal of gold and silver. The US has intensified an oil blockade on Venezuela, increasing pressure on the government of President Nicolas Maduro, while Ukraine has attacked an oil tanker belonging to Russia’s shadow fleet in the Mediterranean for the first time.

Gold is up nearly 70% this year, supported by increased central bank buying and inflows into bullion-backed exchange-traded funds. Trump’s aggressive efforts to reform global trade – as well as his threats to the independence of the US central bank – further fueled the torrid rally earlier this year.

Investors have also played a major role in gold’s rise, fueled in part by the so-called debasement trade – a withdrawal from government bonds and the currencies in which they are denominated, out of fear that their value will erode over time due to rising debt levels. Inflows into gold-backed ETFs have increased for the past four weeks in a row, according to Bloomberg data. Figures from the World Gold Council show that total investments in these funds have increased every month this year except May.

“Today’s rally is largely due to early positioning around Fed expectations for rate cuts, reinforced by tight year-end liquidity,” said Dilin Wu, strategist at Pepperstone Group Ltd. Slow job growth and softer-than-expected U.S. inflation in November supported the narrative of more rate cuts, she said. Other precious metals also rose, with palladium rising as much as 5.1% to reach its highest level in almost three years. Platinum rose for the eighth straight session and traded above $2,000 for the first time since 2008. Gold has bounced back quickly after retreating from its October peak, when the rally was seen as crowded and overheated, and is now positioned to carry these gains into next year. Goldman Sachs Group Inc. is among banks predicting that prices will continue to rise through 2026, offering a base case of $4,900 per ounce, with upside risks.

ETF investors, the report says, are beginning to compete with central banks for limited physical supply.