Gold and silver continue to record highs. But the market can be disrupted

Gold hit another record high on Thursday, surpassing $5,500 an ounce.

Spot gold Prices rose more than 3% and were last at $5,501.18 an ounce, according to LSEG. Gold futures rose more than 3% in February to $5,568.66 per ounce. Spot silver settled at $119.3 an ounce, while U.S. March silver futures rose nearly 5 percent to $118.73 an ounce.

Gold and silver prices rose to their highest levels this month as investors sought refuge from geopolitical uncertainty, analysts said.

Silver topped $117 an ounce for the first time on Thursday after announcing a more than 145% gain in 2025, LSEG data showed. The white metal is up nearly 65% ​​since the start of this year.

The gains lifted the precious metals mix from platinum to palladium and even the base metals.

“We have been predicting a meltdown in gold prices since the beginning of last year,” said Ed Yardeni, president of Yardeni Research.

But he added: “It has become a melting pot of prices for all precious metals, many base metals and rare earth minerals.”

Analysts attributed the demand to investors seeking to hedge against a mix of geopolitical tensions, rising government debt and uncertainty about the future of interest rates and currencies. Steady central bank buying has supported gold, even despite higher borrowing costs, and expectations of eventual monetary easing have increased the appeal of non-yielding assets.

Silver stepped up its move to support demand in solar, electronics and electrification trends with its role as an industrial metal, adding to growth in an already supply-constrained market.

“I would label expensive markets as broken given the unprecedented volatility,” MKS PAMP’s Nikki Shiels told CNBC. According to analysts, prices are less affected by physical supply and demand than by fluctuating liquidity flows, which cause extreme fluctuations and repeated deviations from fundamentals.

“Precious metals have melted down over the past two months and were overbought on a tactical basis,” he added.

Maximilian Tomei, chief executive and co-portfolio manager at Galena Asset Management, said the recent price action was unrelated to fundamentals.

“The movement we’re seeing in metals today isn’t necessarily related to fundamental demand for the metal itself. It’s a movement driven by the attenuation divider, right?” Tomei said. “It’s important because gold is a bit like a currency. If the denominator by which you value it weakens, then the price of gold will rise.”

The dollar index, which measures the strength of the U.S. currency against a basket of currencies, has fallen about 11% over the past 12 months.

Tomei cautioned that while increased fundamental demand for precious metals has been the driver of recent gains, that alone does not justify the scale of the gains. “Fundamentals don’t explain the 200% increase in commodity prices,” he said.

“The way silver is behaving is exaggeration, it’s a series of disconnects. The market is broken,” he said.

Tomei said another potential driver for precious metals is excess liquidity in global markets. As asset prices rise, investors can borrow more, effectively creating new money in the system through margin loans and other forms of leverage that are often hard to see. When stock valuations are stretched, some of that liquidity will look elsewhere, he explained.

According to Tomei, metals like gold and silver serve as a home for that capital, not because the fundamentals have changed dramatically, but because liquidity needs a home.

Some analysts have pointed out how government bonds have lost their traditional appeal as a safe haven amid debt burdens, as seen in the recent global bond selloff.

The result is excessive price movement, especially in smaller precious metals markets where relatively modest flows can drive prices sharply higher, a rally that can feel like a departure from the traditional dynamics of supply and demand.

Similarly, Guy Wolff, global head of market analysis at global financial services platform Marex, said price action in parts of the precious metals complex has become increasingly skewed.

Markets like silver and platinum are part of the benchmarks of gold or major stocks like the S&P 500, meaning recent inflows of speculative capital have a significant impact on prices.

Production capacity constraints mean that physical supply of the metals cannot grow fast enough to meet rising demand, resulting in prices “being completely detached from where physical demand has been stable,” he said, a dynamic that could change dramatically as speculative investors begin to take profits and liquidity declines.

However, not everyone agrees that price determination – the process of setting a market price for a commodity by matching supply and demand – has fallen at all.

Gautam Varma, managing director of strategy consultancy V2 Ventures, refrained from calling the precious metals market broken, but noted that the growth reflected the growing influence of speculative capital.

“As you can see, there’s a lot more speculative capital coming in, and that speculative capital may be driven by reasons other than basic supply and demand.”