Author：Currency Explorer

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Gold extended its relentless rally on Thursday, breaking through $5,500 an ounce to set a new all-time high. Silver, after recording a gain of over 145% in 2025, broke through $117 an ounce for the first time on Thursday, and the white metal has risen nearly 65% this year. This surge has driven the entire precious metals sector, from platinum to palladium, and even rippled across base metals.

“We’ve been predicting a surge in gold prices since the beginning of last year,” said Ed Yardeni, president of Yardeni Research. But he added, “It has now evolved into a surge in prices for all precious metals, many base metals, and rare earth minerals.”

Analysts attribute the demand to investors seeking to hedge against a combination of risks, including geopolitical tensions, ballooning government debt, and uncertainty surrounding interest rates and the monetary outlook. Continued central bank gold purchases provided support for gold, while expectations of eventual monetary easing enhanced the attractiveness of non-interest-bearing assets compared to safe-haven assets like U.S. Treasury bonds.

Silver Frenzy

Silver amplified this rally, supported by its role as an industrial metal, with demand related to solar energy, electronics, and electrification trends adding upward momentum to an already supply-constrained market.

“Given the unprecedented volatility, I would label the precious metals market as ‘malfunctioning,’” Nicky Shiels of MKS PAMP told CNBC.

Analysts say that price drivers are less driven by physical supply and demand and more by volatile liquidity flows, leading to extreme price volatility and repeated decoupling from fundamentals.

“Precious metal prices have surged over the past two months and are tactically overbought,” she added.

Maximilian Tomei, CEO and co-head of portfolio management at Galena Asset Management, echoed this view, arguing that recent price movements are not significantly related to fundamentals.

“What you’re seeing in the metals market today isn’t necessarily driven by the fundamental demand for the metals themselves. It’s a fluctuation driven by a weakening of the pricing currency (the denominator), right?” Tomé said. “That’s important because gold is a bit like a currency. If the currency you use to price it weakens, then the price of gold goes up.”

The dollar index, which measures the strength of the dollar against a basket of currencies, has fallen by nearly 11% over the past 12 months.

However, Tomé cautioned that while some fundamental demand for precious metals has been a driver of the recent rally, this alone is insufficient to justify such a significant increase.

“Fundamentals cannot explain a 200% rise in a commodity,” he said. “Silver’s performance has been exaggerated; it’s a series of disconnects. The market has failed.” Tomé added.Another potential driver for precious metals is the excess liquidity flooding global markets..

As asset prices rise, investors can borrow more money against their portfolios through margin loans and other often imperceptible forms of leverage, effectively creating new money in the financial system. He explained that when stock valuations become too high, some liquidity seeks other places to go. In Tomey's view, metals like gold and silver are increasingly becoming "parking lots" for this type of capital, not because of significant changes in fundamentals, but because liquidity needs a place to reside.

Some analysts point out that against the backdrop of ever-expanding debt burdens, government bonds have lost some of their traditional appeal as safe-haven assets, as evidenced by the recent global bond sell-off.

Detached from reality?

The end result is that price movements are exaggerated, especially in smaller precious metals markets, where relatively mild capital inflows can push prices up significantly, making the upward trend seem disconnected from traditional supply and demand dynamics.

Similarly, Guy Wolf, global head of market analysis at global financial services platform Marex, said,Price behavior in some markets within the precious metals sector has become increasingly distorted.The markets for silver and platinum are only a fraction of the size of major stock indices like gold or the S&P 500, meaning that the recent influx of speculative capital has had a disproportionately large impact on prices.

He pointed out that capacity constraints mean that the physical supply of metals cannot increase rapidly to meet surging demand, causing prices to "completely deviate from levels supported by strong physical demand."This situation could reverse just as drastically once speculators start 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 collapsed. Gautam Varm, managing director of the strategic consulting firm V2 Ventures, avoided calling the precious metals market "malfunctioning," but pointed out that this rally reflects the growing influence of speculative capital.

“You can see more speculative capital getting involved, and this speculative capital may be entering for reasons other than fundamental supply and demand.”