What a year it's been for precious metals! In 2025 alone, gold has gained a whopping 67.3%. Meanwhile, silver has shattered all records and expectations to rise by a triple-digit 129.86%. These kinds of gains would be impressive in growth stocks, but for commodities, they're virtually unprecedented. As of 18 December, gold sat at $4,329.11 per Troy ounce, up almost 7% on the monthly chart. Silver, on the other hand, has passed several key psychological levels this month to hit $66.40 and register a gain of over 30% in the space of just 30 days! After gold gained close to 30% in 2024, which was an achievement in itself, many have spent the past 12 months waiting for a correction that simply won't come, as precious metals continue to seek ever higher highs.
The reasons behind gold and silver's epic rise are multiple and varied, and yet they appear to be working in concert to push prices even higher than the sum of their parts might. The weaker dollar is emphasised by lower T-note yields, which, in turn, are exacerbated by sticky inflation and dovish central bank policy. Add to that the sustaining real bulk gold demand from central banks looking for an alternative to the ailing greenback, and the picture starts to complete itself. However, the question remains: have precious metals now reached their peak, or is there more room for growth in 2026?
Regulating the market
A much-needed pivot to a softer monetary policy from the Fed has predictably helped to support precious metals by making yielding assets less attractive by comparison. The US regulator has now delivered three rate cuts, with the most recent coming at its 9-10 December meeting when it dropped its funds rate down to 350 bps, its lowest level in more than three years. This dovish policy stance has significantly reduced the opportunity cost of non-yielding assets like gold and silver, triggering massive capital flows into precious metals. Indeed, the benchmark 10-year Treasury yield now stands at 4.151%, with the two-year and 30-year offering 3.485% and 4.819%, respectively. And when we account for the weakening dollar, real yields are even lower and, perhaps more importantly, uncertain.
According to Ray Youssef from NoOnes, "Gold's move from around $4,200 before the Fed's 25-bps announcement to $4,326 reveals that smart capital is hedging policy ambiguity." Markets currently price in a 73.6% probability of a pause at the January meeting, though speeches by Fed Chair Stephen Miran and New York Fed President John Williams on Monday (15 December) suggested that the US economy "is turning the corner", at least in the case of inflation. Miran rejected the official inflation statistics, assuring us that "underlying" inflation is running below 2.3%, not far from the Fed's 2% target. According to him, the official inflation rate of 2.8% is down to housing inflation and the way statisticians measure financial advisory fees when the stock market rises. Williams, meanwhile, posited that inflation would ease to just below 2.5% next year and fall to the Federal Reserve's 2% target by 2027. In addition to its active rate-cutting, the central bank is simultaneously purchasing $40 billion in bonds monthly, adding liquidity to the financial system and pressuring the dollar lower. This would also be expected to support gold and silver's ongoing bull cycle.
Buying in bulk
Another key factor for gold's bumper 2025 has been central bank buying, a trend that shows little sign of slowing. According to the WGC, world central banks bought 634 tonnes of gold between January and September 2025, and Morgan Stanley predicts the total for 2025 to be closer to 950 tonnes when all's said and done. This is a direct result of the greenback's weakness and growing uncertainty about the security of one's dollar-denominated assets in the event that a country displeases the US. For the fifth year running, central banks' diversification of their reserves away from dollar-denominated assets should provide strong support for gold in 2026 since regulators typically buy when investor positioning is stretched, money rotates, and prices fall. And so, even if gold corrects in the short term, "the price level is supported much higher than where you started because you get that central bank demand coming through," explains Gregory Shearer, Head of Base and Precious Metals Strategy at JP Morgan.
However, despite gold's gains of more than 60% YTD, institutional sentiment remains inexplicably muted. The Kobeissi Letter recently published survey data from Bank of America explaining that "professional investors can only ignore gold for so long", as it revealed that "only 5% of global fund managers believe gold prices will exceed $5,000 by the end of 2026".
The survey breakdown reveals that 34% of respondents see gold prices falling below $4,000, with 26% anticipating a range of $3,500 to $4,000. Surprisingly, it also showed that 39% of professional investors do not hold any gold at all. That said, Morgan Stanley forecasts gold at $4,500 per ounce by mid-2026, while JP Morgan expects average prices at above $4,600 in Q2 and more than $5,000 in Q4, but the more wide-reaching data of the BoA survey would suggest that there is still a lot of unrealised bulk demand potential from investment funds, which could push prices higher in 2026 if they start to add precious metals to their portfolios.
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