The short-term weakness in precious metals is being driven primarily by inflation fuelled by oil prices, rather than by geopolitical factors. Rising energy prices are strengthening the US dollar and reinforcing the scenario of interest rates remaining high for longer.
The correction in gold appears cyclical rather than structural, while its long-term fundamentals remain intact. In silver, the recent decline has reduced excessive speculative positioning, but the metal’s outlook remains more vulnerable because of its dependence on industrial demand and investment flows.
Gold remains the stronger strategic choice. Silver, as the more volatile metal, offers greater upside potential, but also carries a higher risk of declines.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, explains that the precious metals market has undergone a clear repositioning in recent months. After a powerful rally that pushed gold — and especially silver — to new all-time highs, both metals entered a correction phase. This was not caused by a significant deterioration in long-term fundamentals, but by a sharp change in the macroeconomic environment following the outbreak of the war with Iran.
Rising energy prices, a stronger dollar, higher inflation expectations and the return of a “higher for longer” interest rate scenario in the United States have created more difficult conditions for non-yielding assets.
The price of gold fell to its lowest level in three weeks, while selling pressure intensified after support around USD 4,650 was broken. The key point, however, is that rising oil prices, not geopolitical tensions themselves, are currently playing the dominant role. With Brent crude trading above USD 111, the market is focusing on the inflationary consequences of more expensive energy.
With US economic growth still holding up, supported in part by investment linked to artificial intelligence, the Federal Reserve has no urgent need to cut interest rates. Additional uncertainty comes from earnings reports by some of the “Magnificent Seven” companies and the FOMC meeting, which are taking place on the same day.
In the short term, market attention remains focused on the energy sector. Brent crude prices are holding above USD 111, while the lack of progress in reopening the Strait of Hormuz — where blockades by the United States and Iran have almost completely halted transport — continues to sustain supply tensions.
Warnings about the scale of global shortages of energy commodities are intensifying, while tight conditions in refined fuel markets are already pushing diesel and jet fuel prices towards USD 200 per barrel. The key short-term positive factor for metals would be a reopening of the strait and a decline in oil prices.
Gold: the correction does not change the long-term trend
At the beginning of the year, Saxo did not rule out the possibility that gold could reach USD 6,000 by the end of the year. Since then, however, a correction of around USD 1,500 from the peak of USD 5,595 has changed both the path and the pace of that scenario.
In the short term, higher oil prices and the resulting inflation shock are strengthening the dollar and delaying expectations of monetary easing, which limits gold’s appeal.
This does not mean that the trend has changed. The geopolitical conflict represents a short-term obstacle, but it does not undermine the market’s fundamentals. The factors that drove gold higher over the past two years remain in place, and in some cases have even strengthened.
The risk of stagflation remains present, partly because of the energy crisis and its impact on prices and economic activity. Fiscal debt continues to rise, and although the dominant role of the dollar as a reserve currency is not directly threatened, a trend towards reserve diversification by some central banks and state institutions is visible. In this process, gold remains a natural alternative.
Unlike most commodities, gold primarily has a monetary function. Rising prices do not lead to a significant fall in demand in the way they often do for industrial commodities. Jewellery demand may weaken, and central banks may slow purchases as the value of their existing reserves rises, but structurally gold remains less sensitive to high prices than other metals.
From a technical perspective, the key support level remains the 200-day moving average, around USD 4,250. As long as this level holds, the long-term upward trend remains intact.
Silver: solid fundamentals, but higher sensitivity
The situation in silver is more complex. After a sharp rally to its January highs, the market became clearly overbought. Limited physical supply, strong demand from the photovoltaic sector and an inflow of speculative capital — reinforced by retail investor activity — pushed prices to levels that required very favourable conditions to be sustained.
The correction began even before the escalation of the conflict, but the war with Iran accelerated it. Higher oil prices strengthened the dollar, increased inflation expectations and pushed back the prospect of interest rate cuts, creating less supportive conditions for precious metals. Silver, as the more volatile metal and one partly dependent on economic conditions, reacted with a stronger decline.
From a market perspective, however, this was a healthy correction. It reduced excessive speculative positioning and lowered vulnerability to sudden price moves. The fundamentals remain supportive.
According to the World Silver Survey 2026 prepared by Metals Focus, the silver market is expected to record its sixth consecutive year of supply deficit. Demand continues to exceed available supply, leading to a further decline in above-ground inventories. Falling inventories increase the market’s vulnerability to periods of low liquidity, greater price volatility and higher premiums.
Strong demand from China also continues to support the market, both from the photovoltaic sector and from individual investors. The current energy crisis may also favour investment in renewable energy over the longer term, increasing demand for silver.
At the same time, silver’s outlook remains more complex than gold’s. Industrial demand is sensitive to the economic cycle, while persistently high inflation and slower economic growth may limit consumption in sectors such as electronics and manufacturing. Investment demand, which is crucial for maintaining the deficit, can also be volatile and may reverse quickly when market sentiment changes.
This is why silver remains the more volatile metal: it offers greater upside potential, but also comes with higher risk.
Gold or silver? The differences that matter now
As geopolitical tensions fade and energy supply chains stabilise, gold should once again benefit from monetary demand, reserve diversification, fiscal concerns and continued geopolitical uncertainty. It is less sensitive to cyclical declines in demand and less vulnerable to sudden shifts in investor sentiment.
Silver remains fundamentally attractive, but its outlook depends more heavily on the condition of industrial demand and investor activity. The market could tighten again, and in a favourable macroeconomic scenario, silver could once more outperform gold in terms of returns. However, that path is likely to be more volatile.
The current gold-to-silver ratio of around 62 suggests that silver is relatively expensive compared with the long-term average of around 70. This means that for silver to clearly outperform gold, a new impulse would be needed — whether in the form of further supply constraints, stronger industrial demand or a return of speculative interest.
The bull market in precious metals therefore appears to have been paused rather than ended. Gold has been delayed, but not stopped, and its fundamentals remain strong. Silver still offers significant upside potential, but after earlier excesses it remains more sensitive to macroeconomic factors and changes in investor sentiment.
In practice, this means that gold remains a key element of strategic allocation, while silver plays a more tactical role — with higher risk and potentially higher returns.
