The usual “safe-haven” hypotheses fail to fully explain the extraordinary rally of gold and silver—both experiencing their strongest surge since 1979. At the same time, copper is advancing robustly, driven by the onset of a period marked by structural supply deficits.
By Francisco Noguera
Market euphoria is often linked to record-high stock markets and the rebound of cryptocurrencies. Yet in 2025, metals have emerged as the top-performing asset class. The MSCI World Index—which tracks developed markets—has risen 16%, while Bitcoin is up 14%. In contrast, silver has surged 77%, gold 60%, and copper 21%. Despite differing drivers behind each case, what stands out is that traditional explanations for metal rallies seem insufficient this time.
A Global Financial Shift
Investment banks are asking a key question: what is truly behind gold’s rally? Part of the answer lies in uncertainty about how the ongoing trade war will affect U.S. prices and economic activity. “Persistent weakness in employment increases the risk of recession or stagflation, which supports gold allocations,” noted State Street this week.
However, inflation hedging alone doesn’t explain the full picture. Short-term inflation expectations have remained stable near 3.2% since early April, suggesting that a soft landing remains the baseline scenario. Another argument points to gold as a hedge against overvalued U.S. equities and the fear of a speculative bubble. Yet, volatility indexes like the VIX indicate little anxiety about a market correction, while solid earnings and economic growth continue to support stocks.
The most widely accepted view is that gold’s appreciation reflects a revaluation of the U.S. dollar. “Structural fiscal deficits and debt-financed public spending have turned central banks into permanent buyers of government bonds. This vicious cycle—deficits, issuance, and monetization—keeps real interest rates negative and makes holding cash or traditional fixed income increasingly unattractive,” explained Diego Mora, Head of Research at XTB Latam.
The weakening dollar reinforces this trend. In 2025, the greenback has fallen 9.3%, its steepest annual decline since 2017. “We may be witnessing the early stages of a global de-dollarization movement, with gold playing a central role,” said VanEck.
According to the World Gold Council, central banks purchased over 1,000 tonnes of gold for the third consecutive year, now holding nearly one-fifth of all the gold ever mined. Lisa Shalett, Chief Investment Officer at Morgan Stanley, echoed this view, suggesting that gold’s surge “could be tied to a broader global financial realignment,” while also warning that rising interest in digital assets “may disrupt traditional fiat currency markets.”
Silver Shines Even Brighter
Gold and silver prices tend to move together. “They are closely correlated because their main driver—private investment flows through ETFs or speculative positioning—moves in tandem,”stated Goldman Sachs.
“There’s a historical arbitrage relationship: gold pulls silver upward. Yet silver also has a strong industrial component, particularly in renewable energy and electronics, where demand has grown sharply,” explained Juan Cristóbal Ciudad, Senior Market and Industry Analyst at Plusmining.
The price rally has coincided with shrinking inventories in London, one of the main trading hubs for the metal. Since mid-2021, U.K. silver inventories have halved, and the shortage has deepened amid fears of new U.S. tariffs. “If tariffs are eventually not imposed, that could ease U.S. demand and reduce the scarcity in London,” said Amy Gower, strategist at Morgan Stanley.
Adding to this, India’s demand has surged, with silver imports reaching US$ 1.3 billion in September—the highest level on record.
The Copper Deficit Arrives Sooner Than Expected
Copper has faced a volatile year amid uncertainty following tariff-driven market shifts that redirected large metal volumes to the U.S., altering inventory patterns. Despite this, prices remain strong, with COMEX copper up 21% year-to-date.
“The fundamentals are extremely strong,” said Ciudad of Plusmining. According to Wood Mackenzie, global copper consumption is projected to rise 24% over the next decade, reaching 42.7 million tonnes annually, driven by industrial development and new applications.
However, concerns about supply shortages are mounting. “Copper is the backbone of electrification, digitalization, and industrial growth—but demand is outpacing supply at an alarming rate,” warned Wood Mackenzie.
Recent disruptions in the Congo, Indonesia, and Chile have amplified worries. In May, Kamoa-Kakula, one of the world’s top five copper mines, suffered severe flooding that cut production by 30%. In Chile, Codelco’s El Teniente mine experienced a tragic accident resulting in six fatalities, leading to its lowest monthly production in decades. Teck’s Quebrada Blanca mine also announced it will produce 40,000 tonnes less than forecasted this year.
Meanwhile, in Indonesia, Freeport’s Grasberg mine— the world’s second largest—halted operations after a landslide. “These four events combined could represent production losses of 450,000 tonnes in 2025, 600,000 in 2026, and 300,000 in 2027,” estimated Ciudad of Plusmining, adding that recovery timelines remain uncertain.
“The world is facing an unprecedented wave of copper supply disruptions,” warned analysts at Jefferies.
Source: Diario Financiero