Why Precious Metals Had Their Best Year Since 1979

Gold just had its best year since the Carter administration, up 65%. Silver more than doubled. Our precious metals portfolio $PRECIOUS rode both, gaining 84% in 2025 and another 13% year to date.

So what happened?

The Central Bank Bid

Central banks have been buying gold at a historic pace — over 1,000 tonnes per year for three consecutive years, roughly double the prior decade's average. Poland, China, India, Turkey, and Singapore have been the big buyers.

The motivation is simple: after Western nations froze Russian central bank reserves in 2022, every non-aligned central bank took notice. Gold can't be frozen with a keystroke.

Gold's share of global reserves climbed from ~15% at end of 2023 to ~20% by end of 2024, and buying continued through 2025. This puts a floor under prices. Central banks aren't speculating, they're stockpiling gold and will hold it for decades.

The Macro Picture

On top of central bank buying, the broader economic picture was favorable for precious metals - the Fed cut rates, the dollar fell ~10%, and U.S. fiscal concerns pushed investors toward hard assets (physical things like gold, real estate, and commodities—not paper promises). The United States national debt now exceeds $38 trillion with persistent deficits and no political appetite to address either.

Gold benefits from both. A weaker dollar makes gold cheaper for foreign buyers and lifts its dollar price. And when governments run unsustainable deficits, investors worry about eventual inflation. Gold is the classic hedge because the government cannot print more of it.

The Uncertainty Premium

Beyond the economic factors, something else shifted in 2025-26: confidence in the institutions themselves. Trump's April "Liberation Day" tariffs pushed effective US tariff rates to their highest since 1943, but the bigger issue was unpredictability — nearly 100 tariff policy decisions (including announcements, delays, and reversals) between April and August alone. This month, Trump threatened 10-25% tariffs on Denmark and seven other NATO allies over Greenland.

Then there's the Fed. The administration attempted to fire Fed Governor Lisa Cook, and the DOJ opened a criminal investigation into Chair Powell in January. If markets lose confidence that monetary policy is set by data rather than politics, the case for money governments can't control strengthens considerably.

Silver: Gold Plus an Industrial Squeeze

Silver got gold's tailwinds plus something gold doesn't have: an industrial demand story.

Industrial applications now account for nearly 60% of silver demand. Solar panels are the big driver — each panel uses 15-25 grams of silver with no good substitute. Solar alone consumes roughly 200 million ounces annually, and EVs and AI/data center buildout are adding to demand.

Supply can't keep up. Silver has been in structural deficit (demand outpacing supply) for five consecutive years — cumulative shortfall of about 800 million ounces, an entire year of mine production. And because ~70% of silver is mined as a byproduct of copper, zinc, and lead, supply doesn't respond quickly to higher prices. Miners dig for copper; silver is just what comes up with it. So even when silver prices spike, nobody's opening new silver mines.

This is why silver surged 144% while gold "only" gained 65%. Silver followed gold higher as a precious metal and got the industrial squeeze on top.

Looking Forward: Uncertainty in Both Directions

After a year like this, the natural question is: how much is left?

We'd start with humility. Commodity prices are cyclical — high prices attract supply and encourage substitution. Solar manufacturers are already working to reduce silver content per panel. Central banks won't diversify into gold indefinitely. The easy gains may be behind us.

That said, several forces look more persistent than transient:

Silver's supply constraint is structural. Because most silver is mined as a byproduct, supply can't ramp quickly. The deficit has persisted for five years and isn't projected to close soon. Meanwhile, solar and AI infrastructure remain massive growth stories driving demand higher.

Central bank buying is policy-driven, not speculative. Reserve diversification is a multi-year strategic process.

Geopolitical uncertainty is increasing, not normalizing. The US just deposed Venezuela's president in a military operation. The Russia-Ukraine war grinds on. Tariff policy shifts weekly. Trump has threatened to seize Greenland "the hard way."

U.S. fiscal concerns are deteriorating. This underpins the case for hard assets and gives other central banks reason to continue diversifying.

None of this means prices go up in a straight line — corrections happen. But the forces that drove 2025 don't look exhausted.