Financial gold experiences modest increases in value, persisting amidst the lingering ambiguity surrounding international trade negotiations
In a rapidly changing global economic landscape, gold and silver prices have surged significantly in 2025, driven by trade uncertainty and US inflation trends. Countries are frantically pacing to negotiate and strike a deal with their US counterparts, while the US and the West remain silent on the two Red Sea attacks conducted by Yemen's Houthi rebels last week, sinking two bulk carriers.
Rising geopolitical risks, such as tariffs and trade wars initiated by US policy changes, have pushed investors toward safe-haven assets like gold and silver. Mexico, the world's largest silver producer, being directly affected by such tariffs has added pressure on silver supply, contributing to elevated prices for silver.
Yesterday's Consumer Price Index data showed headline inflation in line with forecasts but a slightly lower core reading, which tempered expectations for immediate rate cuts. This mixed inflation outlook weakened the US dollar, thereby increasing demand for hedging instruments such as silver and gold.
Gold prices have surged approximately 39% year-over-year, hitting around $3,350–3,360 per ounce in July 2025, and even reaching an all-time high of $3,500 in April 2025. Silver has climbed about 25–26% in the same period, trading between $36 and $38 per ounce, levels not seen since 2011.
Central banks have been significant buyers, with over 1,086 tonnes of gold purchased in 2024, marking three consecutive years of purchases above 1,000 tonnes. This accumulation provides structural price support to gold. Silver faces growing supply deficits for the fifth consecutive year, caused by mining disruptions and declining primary silver mine output. Concurrently, silver demand is buoyed by industrial uses, particularly in solar panels and electric vehicles as part of the clean energy transition.
Silver-backed ETF holdings rose to over 1.13 billion ounces by mid-2025, showing investors' buy-in amid tightening supply and rising geopolitical risks. The gold/silver ratio remains elevated at 85–92:1, above the historical average of 60:1, reflecting silver’s particularly strong industrial demand and supply constraints.
Analysts forecast gold will continue appreciating, targeting about $3,675 per ounce by Q4 2025 and potentially reaching $4,000 by mid-2026, supported by ongoing central bank purchases and macroeconomic uncertainties. The context of stagflation—with persistent inflation alongside slowing growth—strengthens gold’s safe-haven appeal, encouraging central banks to bolster their gold reserves further as a hedge against currency and economic instability.
The US Fed's next monetary policy decision will be on July 30. Recent economic data and President Donald Trump's latest aggressive trade measures have dimmed the hopes of an interest rate cut. If stagflation intensifies or recession begins, the price of gold may go up another 10% to 15%. US capacity utilization edged up to 77.6% in June, and US Manufacturing Output crept up 0.1% in June.
After pushing the "reciprocal tariff" suspension period deadline from July 9 to August 1, Trump announced a spate of tariffs on various trade partners. Trump has expressed his displeasure with the Fed for not cutting rates. China's official gold holdings have risen for eight consecutive months. The council states that central banks are increasingly bolstering their gold reserves.
Finance experts suggest that increased geopolitical risks, such as trade wars and tariffs, have driven investors to seek safe-haven assets like gold and silver due to the uncertainties in politics and general news, with this trend being further intensified by the US-West's silence on recent Red Sea conflicts.
The surge in gold prices, with an approximate 39% increase year-over-year, has correlation with the increase in silver prices due to the rising demand for hedging instruments and the supply deficit in the silver industry.
