Precious Мetals at Historic Highs: What’s Driving Gold and Silver?

On October 9, the spot price of silver in London broke the key level of $50 per ounce, reaching a peak of $51.22 — the highest since 1980. This sharp surge was accompanied by an unusually high premium of over $2.50 between spot and futures prices, signaling difficulties in physical deliveries. In response, the Chicago Exchange raised margin requirements for silver and gold futures.

The market is facing a shortage of physical silver — the one-month lease rate has reached 34.98%, while freely available stocks in London are estimated at below 4,000 metric tons. Exports from China have become profitable due to the price differences between the domestic and international markets.

According to analysts, the current surge in price is mainly driven by logistical and physical constraints rather than macroeconomic demand. Factors supporting high prices in the medium and long term include currency uncertainty, the expected cycle of interest rate cuts, and steady growth in industrial demand — particularly in the new energy and photovoltaic industries.

International spot gold prices have surpassed $4,000 per ounce this month, reaching record highs. Since the beginning of the year, the price has risen by over 53%, marking gold’s best performance since 1979, according to the World Gold Council. In March, the price first crossed the $3,000 mark, and by the end of August, it climbed from around $3,300 to $4,000 per ounce.

In response to increased volatility, several Chinese banks — including ICBC, CCB, the Agricultural Bank of China, and Ningbo Bank — issued risk warnings to their clients. They also adjusted the terms of their precious metals trading products, including raising investment thresholds, margin requirements, and updating trading halt rules.

For example, ICBC raised the minimum investment amount for gold savings from 850 yuan to 1,000 yuan, while warning that destabilizing market factors have increased. The bank advised clients to invest rationally according to their financial situation and risk tolerance.

According to analysts, the main drivers behind gold’s rise include trade tensions, a weakening U.S. dollar, expectations of Federal Reserve rate cuts, and global geopolitical uncertainties (including a potential U.S. government shutdown).

Goldman Sachs said on Sunday that silver prices are likely to continue rising in the medium term, supported by inflows of private investment — similar to gold, which is benefiting from anticipated interest rate cuts by the Federal Reserve.

However, the bank warned that silver is exposed to higher short-term volatility and downside risk compared to gold, which enjoys stable demand from central banks.

According to the bank’s analysis, investment demand is the main factor driving silver prices — every additional 1,000 metric tons of demand typically raises prices by about 1.6%.

The silver market, however, is significantly smaller — about $50 billion compared to roughly $450 billion for gold, including ETF assets and speculative positions. This makes silver more sensitive to shifts in investor sentiment, leading to sharper price fluctuations when capital flows in or out.

“Silver prices react sharply to such flows because the market is less liquid and about nine times smaller than gold’s, which amplifies price movements,” Goldman analysts commented.

The bank also identified two key risks for a potential short-term correction in silver prices:

• On the demand side: a possible temporary slowdown in inflows into ETFs, which traditionally increase during rate-cut cycles.
• On the supply side: a delay in the recovery of normal inventories at the London hub if traders postpone returning silver from the U.S. due to ongoing investigations into possible tariffs on critical minerals.

Goldman also noted that, unlike gold, silver does not benefit from structural support by central banks. Furthermore, the bank downplayed the long-term importance of industrial demand, pointing out that although silver is used in the solar industry, growth in the sector is slowing, and manufacturers are beginning to replace it with cheaper materials such as copper.