Gold broke above US$4,400 per ounce on Monday, while silver approached US$70, as expectations of looser U.S. monetary policy and geopolitical tensions drove both metals to new record highs.
Spot gold traded as high as US$4,435.28, while silver hit US$69.44, adding to huge gains this year.
"With precious metals making record prices so late in the year, when ordinarily one might have found time to write a Christmas card or two, perhaps the biggest takeaway is that investors have not treated the festive break as an occasion to take profits," Mitsubishi analysts said.
GEOPOLITICAL AND MACRO DRIVERS
Bullion has hit multiple record highs this year, underpinned by U.S. interest rate cuts and a weaker dollar. Analysts see more upside into next year, with Goldman Sachs forecasting gold at US$4,900 by December 2026.
The dollar has slumped 9% in 2025, putting it on track for its worst year in eight. Many investors expect the currency's decline to resume in 2026 as global growth picks up and the Federal Reserve eases policy further.
"Rate cut bets have ramped up following the recent inflation and labour data prints in the U.S. which is helping drive precious metal demand," said Zain Vawda, analyst at MarketPulse by OANDA.
Safe-haven demand is also expected to remain strong amid tensions in the Middle East, uncertainty over a Russia-Ukraine peace deal and more recently U.S. action against Venezuelan tankers.
ETF INFLOWS AND CENTRAL BANK BUYING
Central bank demand for gold has been elevated for four years and is likely to continue into 2026, alongside strong investment demand, analysts said.
Central banks are on track to buy 850 tons of gold in 2025, down from 1,089 tons in 2024, said Philip Newman, managing director at consultancy Metals Focus. "It's still a very healthy figure in absolute terms," he added.
Physically-backed gold exchange-traded funds are on course for their biggest inflow since 2020, attracting US$82 billion, equivalent to 749 tons, so far this year, according to the World Gold Council.
Jewellery demand has been under pressure due to high prices, partly offset by strong retail investment in bars and coins. Jewellery consumption in India fell 26% year-on-year to 291 tons in January-September, with the fourth quarter also looking weak, Metals Focus said, adding that softness would carry into 2026.
Retail investment in bars and coins in India rose 13% to 198 tons in the same period, driven by record prices and bullish expectations, Metals Focus said.
SILVER OUTSHINES GOLD
Spot silver has surged about 139% this year, outpacing gold's 68% gain, supported by robust investment demand, its inclusion on the U.S. critical minerals list, and momentum buying.
Silver exchange-traded product inflows have surpassed 4,000 tons, said Standard Chartered analyst Suki Cooper.
"Momentum and fundamentals support further gains, though stretched positioning and low year-end liquidity may cause volatility, with traders buying dips while real yields remain low and physical supply tight," Mitsubishi analysts said.
Silver is already technically overbought, analysts said, as it now takes just 64 ounces of silver to buy an ounce of gold
"There will definitely be people trading the gold-silver ratio, but otherwise, when this febrile atmosphere evaporates, they will decouple and silver will almost certainly be the underperformer," StoneX analyst Rhona O'Connell said. - Reuters
