The soaring prices of gold and silver in 2025 remain unscathed by the highest real interest rates seen in nearly two decades, a situation that has surprised many in the financial world.
On Tuesday, both gold and silver prices bounced back after a slight overnight decline, approaching the remarkable all-time highs recorded last week in London. This resurgence occurred against the backdrop of falling global stock markets and a decline in long-term interest rates, which eased from their multi-month peaks following disappointing data on manufacturing, services, and employment.
Gold prices surged over $60 from the previous dip, reaching an impressive $4,274 per Troy ounce, marking a new record for the precious metal this October. Simultaneously, silver made a noteworthy recovery, increasing by $1 per ounce to reach $63.85.
In the bond market, significant government bond prices stabilized, leading to a decrease in yields for new buyers of 10-year US Treasury bonds, which had recently touched three-month highs at around 4.16% annually. Additionally, inflation-linked Treasury bonds also saw price increases, resulting in a drop in 10-year TIPS yields to 1.90%, down from four-month highs near 1.94%.
Nicky Shiels, a metals strategist at Swiss bullion refining and finance group MKS Pamp, has published a forecast for 2026 highlighting a sustained upward trend for gold prices, driven primarily by what she describes as a change in the geopolitical and macroeconomic landscape. She anticipates that gold could reach as high as $5,400 next year. Despite suggesting that the current gold market may feel somewhat late in its cycle, she emphasizes that we are only at the beginning stages of a debasement cycle, positioning gold in 2026 as a strategic asset with diminished sensitivity to real yields or fluctuations in the dollar's value.
As of 2025, the average real yield on 10-year inflation-protected US Treasury TIPS stands at 1.97% per annum, which is a modest increase from 2024 and represents the highest level since 2007. Remarkably, despite the strength of these real interest rates—historically viewed as a negative indicator for gold prices—gold bullion has surged over 65% this year alone, marking its steepest annual increase since 1979.
From 2003 to 2021, there was a strong inverse correlation between dollar-denominated gold prices and 10-year TIPS yields, with an average rolling 12-month correlation coefficient of -0.73. A coefficient of -1.0 would indicate perfect inverse movement, while +1.00 would suggest they always moved together. However, since Russia's invasion of Ukraine in 2022, this correlation has shifted dramatically, reflecting a median reading of +0.02 over the past four years.
Keisuke Okui from the Japanese conglomerate Sumitomo remarked on the potential downsides for 2025, highlighting concerns about US interest rates and the price of gold itself. He predicts an average gold price of $2,925 per Troy ounce for this year, positioning him to potentially win the LBMA's 2025 forecast competition. He notes that not many in the market anticipated continuous declines in USD interest rates, especially given that gold prices were already relatively high compared to those in 2024. His forecast is currently 14.0% lower than gold's year-to-date price of $3,400 per ounce.
According to analysis from ICBC, a Chinese-owned London bullion bank, the recent rally in gold prices has been fueled by both a highly charged geopolitical and geoeconomic landscape, coupled with a general weakness of the US dollar and slightly lower interest rates.
Recent preliminary PMI surveys indicate a contraction in manufacturing activity this month across Japan, the Eurozone, and the UK, while global service sector growth appears to be slowing down. In the United States, job creation exceeded expectations based on delayed November data, yet the unemployment rate climbed to 4.1%. Meanwhile, the UK has experienced a rise in unemployment to 5.1%, marking a four-year high.
These economic dynamics have prompted investors to seek diversification in their portfolios due to lackluster bond performance and concerns over inflated equity valuations. As a result, there has been a notable surge in investment demand for gold across various regions, and central banks have continued their buying spree. Silver, which is often viewed as more industrially valuable, has seen a remarkable rebound, climbing nearly 120% so far in 2025.
