Gold and silver see fresh gains as Trump 2.0 era begins

By Ole Hansen, Head of Commodity Strategy at Saxo

Gold and silver prices have both benefited from the increased uncertainty caused by a wave of Trump announcements following his inauguration, including tariffs, with investors also evaluating their inflationary impact and effects on monetary policies. The latest run-up in prices—in gold to an 11-week high near last year’s record, and silver towards resistance around USD 31—was triggered by Trump’s threat to impose tariffs on some of its major trading partners, including Canada, Mexico, Europe, and China.

In addition, the possibility of tariffs on imports of key metals traded on the New York futures exchange has caused significant market uncertainty, uprooting normal price spread relations between spot and futures prices in the short term. Under normal circumstances, this difference reflects the cost of carry, transportation, and storage. However, the risk of tariffs has driven up premiums for futures deliverable in New York, thereby adding another layer of support on top of the general support driven by uncertainty and a softer dollar.

The Dollar Index futures, which reflect the performance of six major currencies against the dollar, started a strong uptrend in late October, now showing signs of pausing. This development has added some support to gold and silver—two metals that, despite this headwind, have rallied strongly during this period, resulting in record high gold prices being reached against multiple currencies.

Gold has rallied strongly this week, with the move accelerating after breaking resistance—now support—at USD 2,725, clearing the path to retest last year’s record high at USD 2,790. In our recently published Q1 2025 outlook, we reiterated our long-held bullish view on both gold and silver. Demand for investment metals continues to be fuelled by an uncertain geopolitical landscape, where global tensions and economic shifts have led investors to seek safer assets. With Trump 2.0 upon us, this development shows no signs of fading, given the potential risks of tariffs causing inflation to move higher and the dollar eventually weakening, thereby removing an obstacle standing in the way of further gains.

Central bank buying looks set to continue, thereby providing a soft floor under the market, as they seek to diversify away from the USD and USD-based assets such as bonds. Together with concerns about mounting global debt, particularly in the United States, investors continue to seek a hedge against economic instability by turning to precious metals, including both gold and silver.

While investment-driven factors will continue to play an important supportive role for silver, its price dynamics are also closely tied to its industrial uses, from which it derives more than 50% of its total demand. In 2024, increased industrial demand has helped create physical tightness in the silver market. Sectors such as electronics and renewable energy, particularly photovoltaic (solar) technologies, have significantly contributed to this surge. The expectation of sustained industrial demand is likely to keep silver in a supply deficit into 2025, potentially deepened by a pick-up in ‘paper’ demand through exchange-traded funds. This dual role—balancing both investment and industrial demand—could enable silver to outperform gold in the coming year.

Silver continues to recover from the deep end-of-year correction that saw the white metal tumble 17% from a 12-year high at USD 34.87 to a December low at USD 28.74. Besides renewed demand from wrongfooted short sellers in the futures market at the start of the year, prices have also been supported by the factors driving gold higher, as well as the fundamental outlook for a fifth consecutive annual supply deficit. A break above USD 31.08—the 0.382 Fibonacci retracement—may see the metal target USD 31.80 next, while a break above USD 32.53 is needed to send a technical signal of a return towards last year’s top.

We forecast a potential decline in the gold-to-silver ratio, which currently trades above 89, possibly moving towards 75—a level seen earlier in 2024. If this occurs, and with gold reaching our current forecast of USD 2,900 per ounce, silver might trade above USD 38 per ounce, both well above the cost of carry.

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