Gold and silver are enjoying great interest from investors this year. According to the data, the price of gold has increased by about 28% since the beginning of the year, and silver by as much as 65%. These increases are driven by rising geopolitical tensions and concerns about the independence of the Federal Reserve (Fed), that support the so-called “debasement trade” – a strategy that assumes capital protection against currency devaluation.
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Reduced liquidity and increased volatility
According to Simon Biddle, head of the precious metals department at the Tullet Prebon brokerage company belonging to TP ICAP Group, quoted by Bloomberg, dynamic price increases limit the ability of banks to engage in transactions on the precious metals market. — Banks don't have infinite balance sheets to trade precious metals, he noted. As a result, reduced trading volumes lead to less liquidity in the market and greater price volatility.
Experts interviewed by the agency also point to the so-called gamma squeeze, a technical mechanism that may further intensify price increases. When dealers sell cheap options, they are forced to buy gold futures as collateral. In conditions of tight liquidity, such a sharp increase in prices can create a snowball effect, strengthening the rally without additional physical demand for bullion.
The gold boom continues
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Fed policy and global tensions
Investor expectations of the Fed also play a key role in current movements in the precious metals market. The US central bank's decision to leave interest rates unchanged, as well as speculation about a possible easing of monetary policy, favors assets that do not generate interest income, such as gold. Among the potential candidates for the position of chairman The Fed is naming BlackRock Inc.'s Rick Rieder, who favors more aggressive interest rate cuts.
Concerns about fiscal stability also remain significant. An example is the recent sell-off in the Japanese bond market, which sparked speculation about a possible US intervention to support the yen. The weakening dollar makes gold cheaper for buyers outside the US, which further supports demand for the bullion.
Concern over White House policy
The policies of President Donald Trump's administration have been causing considerable concern on the markets in recent weeks. The US president downplayed the decline in the value of the dollar, which reached its lowest level in almost four years, although Treasury Secretary Scott Bessent assured that the administration supported a strong currency and ruled out intervention in the market.
Additionally, unpredictable actions by the White House, such as threats to annex Greenland or possible military interventions in Venezuela, are fueling uncertainty among investors. In recent days, Trump has warned Iran of military attack if there is no agreement on its nuclear program, and has also threatened South Korea and Canada with new trade tariffs.
