Amidst escalating tensions between the United States and Iran, global investors are increasingly turning their attention to the precious metals market. According to London Metal Exchange prices on the 1st, gold traded steadily around $4,627.40 per ounce, while silver was priced at $74.58 per ounce. Just recently, gold prices had surged to $5,341.90 per ounce following news of potential military clashes in the Middle East; although they have since cooled, they remain near record highs, indicating that market anxiety persists.
Experts analyze that the view of precious metals as safe havens remains firmly entrenched. Gold has historically been classified as a premier defensive asset, seeing demand spike during wars or financial system instability. Silver also possesses a dual nature: it functions as a precious metal while simultaneously being an essential material in industrial sectors such as solar panels and electronic components. As geopolitical risks in the Middle East grow, both metals are gaining appeal as safe assets. However, the recovery pace of global manufacturing and fluctuations in energy prices, which affect industrial demand, are key factors determining the volatility of silver prices.
Gold-related and silver-related exchange-traded funds (ETFs) traded on the New York Stock Exchange are also following the bullish trend of the spot market. Although exact fund prices are not disclosed, evaluations indicate they are recording a concurrent upward trend in line with the rapid rise in spot prices. Notably, speculative capital flowing in from China has been rapidly entering and exiting the futures market and related funds, causing immediate reflection of short-term buy and sell sentiments in fund prices. This illustrates how the reaction speed of fund markets, which involve only the flow of funds, can differ from the spot market, where actual goods are bought and sold.
Politics and geopolitical variables are currently driving market trends. The war triggered by preemptive airstrikes by the U.S. and Israel has intensified military tensions across the Middle East, fueling a preference for safe assets. Pressures on troop deployments through the Strait of Hormuz and concerns over inflation caused by disruptions in oil supply have acted as direct stimulants for gold prices. Furthermore, political instability in South America, including the arrest of Venezuelan President Maduro, and intensified trade conflicts due to U.S. threats of additional tariffs on Europe have also reinforced risk-averse sentiments. There is also a temperature difference between the spot market and the fund market; while the deepening Middle East conflict and the influx and outflow of Chinese capital caused spot prices to drop by double digits in a single day, increasing volatility, funds showed a lagged adjustment due to overlapping financial market factors such as trading hours, liquidity, and hedging demand. This is interpreted as a reflection of the structural differences between the spot market, centered on physical delivery and long-term holding, and the fund market, characterized by active short-term trading and arbitrage.
Overall, the market atmosphere is defensive. Reports suggest that some emerging market central banks, including the Central Bank of Turkey, are expanding gold purchases, making central bank demand a symbol of the preference for safe assets. Conversely, the Vietnamese government has issued directives to minimize gold hoarding and speculation, adopting policies to induce demand for jewelry, showing that governments are actively managing domestic gold supply and demand. In the silver market, policy issues are also at play, including the U.S. including silver on its critical minerals list and utilizing Section 232 of the Trade Expansion Act to discuss minimum price floors for major minerals. While still in the discussion phase, the unique characteristic of silver, where industrial demand overlaps with strategic reserve demand, means that caution regarding policy directions is acting as a background factor for price formation. The case where Chinese capital pushed silver prices up in a short period only to trigger a 26% drop in a single day demonstrates that volatility can expand further when speculative trading overlaps with policy and geopolitical variables.
Gold and silver prices are evaluated as assets that are highly sensitive to U.S. Federal Reserve monetary policy, the value of the dollar, and geopolitical variables such as the U.S.-Iran war. Discussions on monetary policy changes are continuing, with the Trump administration nominating the hawkish Kevin Warsh as the next Federal Reserve Chair, highlighting expectations of a stronger dollar. It is necessary to note that price volatility is likely to continue in the short term based on interest rates, exchange rates, wars, sanctions, and trade conflicts.