The surge in gold prices above US$4,000 per ounce is spilling over into other precious metals on fears the Trump administration’s unorthodox economic policies will shift the prevailing trend from de-dollarization to outright debasement of the U.S. currency.
Silver, platinum and palladium are enjoying upsized gains for the year as investors fret about a whole host of geopolitical and economic uncertainties, with U.S. President Donald Trump’s attempts to reshape global trade raising anxiety around world capitals and corporate boardrooms.
Surprisingly, gold is the worst-performing of the four precious metals this year despite a rousing 53.8-per-cent year-to-date rally making it the hottest streak for bullion in almost half a century. Platinum has had an even better year, leading the pack with an 83.6-pere-cent rise year-to-date. Spot silver hit a record high of US$49.57 this month after a 70.4-per-cent rally during the same period. And basking in a surge last month, palladium is up 60.5 per cent.
In embracing what J.P. Morgan calls the “debasement trade”, investors have turned to precious metals and other real assets as a safer store of value, fearing that Trump’s shakeup of the economic and political landscape and attacks on the independence of the Federal Reserve will erode the primacy of the U.S. dollar in global finance.
Taylor McKenna, a mining analyst at value fund manager Kopernik Global Investors in Tampa, Florida, expects further gains for gold, but says the rally could decelerate as prices become high enough to incentivize a search for new mines and increase future supply of the metal. “We still like gold, but we like it a lot less,” he told Reuters last month.
Gold overtook the euro as the second biggest reserve asset in 2024 after the U.S. dollar, according to a report from the European Central Bank in June.
Since then, the gold rally has lifted the value of central banks’ bullion holdings above U.S. Treasury bonds. The IMF’s most recent data for the second quarter show gold accounting for a record high of 24 per cent of total assets, up from 23.3 per cent at the end of the previous quarter.
“Investors should not short U.S. bond or equity markets because of anything Trump does to data or the central bank,” wrote BCA Research chief strategist Marko Papic. “Instead, they should go long hard assets, of which — for the time being — we like palladium the best.”
“Silver’s rally is strongly linked to record-high gold prices,” wrote HSBC chief precious metals analyst James Steel in a research note this week, raising the bank’s average price forecast to US$38.56 per ounce this year and US$44.50 per ounce in 2026.
“Gold exerts a strong gravitational pull on silver,” he said, adding: “Gains in gold attract ancillary buying in silver, possibly by investors who have not taken full advantage of the gold rally.”
Kopernik’s McKenna believes platinum will likely outperform as even after the rally, prices haven’t kept up with gold - despite a traditionally tight correlation between the two - and the resulting discount will create incentives that are likely to favour investment in new gold mines instead, taking supply off the market.
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