Gold and silver hit new record highs on geopolitical tensions and structural demand drivers

Geopolitical tensions fuel risk-off inflows

Gold and silver extended their rallies to fresh all-time highs as renewed geopolitical tensions fuelled safe-haven demand. The US blockade on oil entering and leaving Venezuela intensified after the Coast Guard seized a second oil tanker that had last docked in Venezuela ^[1], while Reuters reported that US authorities are also pursuing a third vessel ^[2]. In addition, the United States carried out strikes on ISIS targets in Syria, although Department of War Secretary Hegseth clarified that this "is not the beginning of a war" ^[3].

Meanwhile, fresh Sino-US frictions have emerged following US arms sales to Taiwan ^[4], with a Chinese Foreign Ministry spokesperson warning of "serious consequences" for any arming of the island ^[5]. These developments come as the war in Ukraine continues, despite ongoing diplomatic efforts aimed at reaching a peace agreement.

XAU/USD Analysis

Renewed geopolitical tensions complement gold's tailwinds from expectations of monetary easing by the Federal Reserve, which continue to weigh on the USDOLLAR and support non-yielding assets. Policymakers cut rates earlier this month and left the door open to further moves, while the next Fed Chair could adopt a more dovish stance that aligns with President Trump's preference for easier monetary policy.

In addition, gold continues to benefit from strong structural demand driven by central bank buying, led by China and the PBoC, which increased its gold reserves for a thirteenth consecutive month in November ^[6]. This dedollarisation push coincides with broader currency debasement concerns linked to widening global fiscal deficits. The IMF expects public debt to exceed post-Second World War levels by 2029 ^[7], a trend that undermines confidence in major currencies and supports bullion prices.

These forces have pushed XAU/USD to a new all-time high and could help extend its strong performance into 2026. However, the metal remains vulnerable to pullbacks towards the 200-day EMA, which would challenge the bullish bias. The Fed may struggle to deliver multiple rate cuts next year amid persistently elevated inflation, while a successful outcome in Russia-Ukraine peace negotiations could reduce geopolitical risks and dampen safe-haven demand.

XAG/USD Analysis

Silver also benefits from risk-off flows and US dollar weakness, but it has additional drivers that have helped it outperform gold this year and could continue to do so into 2026. Its role in critical infrastructure underpins structural demand, with the US Geological Survey recently adding silver to its critical minerals list ^[8], highlighting its strategic importance.

Silver is integral to the AI boom and data centre expansion, the clean energy transition and applications such as photovoltaics and electric vehicles, as well as the defence sector amid rising military budgets. The Silver Institute expects industrial demand to remain strong due to silver's use across these key industries. ^[9]

Nonetheless, the Institute expects overall demand to have declined this year ^[10], while supply has remained relatively steady. This dynamic could persist into 2026, as disruptive trade policies risk weighing on demand and exerting downward pressure on prices.