Gold & Silver: The Rush That Doesn’t Settle Down

History of gold, silver and platinum

Disclosure

Metals are not an area actively tracked in my research, but sharp moves in precious metals and investor questions warrant a closer look. This article addresses those questions for educational purposes only and should not be construed as investment advice. Consult your financial advisor for tailored guidance.

Universal Price Drivers Across Metal Categories

The Clean Energy and Electrification Megatrend

The global energy transition has emerged as the dominant structural demand driver, driving unprecedented consumption growth across multiple metals. Copper, aluminium, silver, nickel, and tin are all experiencing demand acceleration from electric vehicles, renewable energy generation, grid expansion, and energy storage systems.  

AI Infrastructure: The New Demand Catalyst

2025 marked the emergence of AI data centres as a major metals consumer, with North American spending reaching $50 billion. This infrastructure requires enormous quantities of copper for power distribution, silver for advanced components, and aluminium for structural and conductive applications. Unlike traditional cyclical demand, AI-driven consumption represents a secular growth vector that compounds existing clean energy demand.

Supply Chain Vulnerabilities and Production Constraints

Supply-side challenges have intensified across the metals complex:

• Geopolitical Disruptions: Silver faces recurring tightness as Russia has become an active buyer rather than a seller, while export and financial restrictions on Russian metals have reduced flexibility in global trading and leasing markets. In gold, central‑bank and sovereign accumulation have tightened available float just as geopolitical tensions have risen, increasing the market’s sensitivity to any disruption in key producing or refining hubs.

• China's Production Constraints: China is a leading gold producer and recycler, and a major importer and consumer of silver and platinum, but faces water, energy, and emissions constraints that limit the aggressive expansion of domestic mining and smelting capacity. At the same time, Beijing’s strategic treatment of precious metals—such as classifying platinum as a strategic critical mineral and encouraging onshore futures and inventory build‑up—can periodically tighten seaborne availability and increase volatility for the rest of the world.

India Pricing Issue

India stands out with robust metals demand growth, as an estimated 6.5% GDP expansion in 2025 feeds into roughly 6.1% growth in basic metals output, supported by large-scale infrastructure spending, housing, rail and road projects, and accelerating EV and renewable-energy investments.  

A combination of global market deficits, tighter availability from major exporters such as Mexico and Peru, and higher landed costs from rupee depreciation and import duties has pushed Indian silver prices to 5–12% premiums over international benchmarks, with spot prices at times trading 5–10% above MCX futures—a clear sign of scarcity in the local physical market.

During the October 2025 “silver squeeze”, domestic silver prices briefly spiked to around ₹1.9 lakh per kg, and ETF units traded at steep premiums to their intrinsic NAV because fund houses could not source enough physical silver; one large fund even suspended fresh lump‑sum subscriptions to its silver FoF until supply normalised.

Supply chain vulnerabilities and production constraints in precious metals like silver, gold, and platinum create persistent tightness, exacerbated by geopolitical shifts and robust demand from emerging markets such as India. These factors have driven price premiums and physical shortages, particularly in India. 

Conclusion

All metals, including gold, primarily function as speculative assets driven by anticipated demand-supply imbalances rather than as income-generating assets like equities or real estate, warranting classification as speculation when allocating funds. While gold merits a small portfolio allocation for diversification or inflation hedging, other metals require stronger justification amid steep volatility from inelastic supply constrained by geological limits and geopolitical risks.