Precious metals face near-term pressure from oil-driven inflation risks

Gold: delayed, not derailed

Earlier this year we did not rule out gold reaching USD 6,000 by year-end, but since then a USD 1,500 correction from the USD 5,595 peak has changed both the path and the timing. For now, rising oil prices and the resulting inflation shock are reinforcing dollar strength and pushing back expectations for monetary easing, reducing the appeal of non-yielding assets such as gold in the short term.

However, while the conflict has become a near-term hurdle, it does not represent a roadblock. The structural drivers that powered gold’s rally over the past two years remain firmly in place and, in several cases, have strengthened.

Beyond the current oil-driven inflation focus, the longer-term support pillars remain intact. Stagflation risks persist, not least due to the energy crisis and its short- to medium-term impact on prices and economic activity. Fiscal debt burdens continue to mount, and while the dollar’s reserve currency status is not under imminent threat, there remains a visible trend among some central banks and sovereign institutions to diversify reserves and gradually reduce reliance on the greenback. Gold remains the natural alternative reserve asset in that process.

Unlike most commodities, gold benefits from being first and foremost a monetary metal. Higher prices do not materially destroy demand in the same way they do in industrial commodities. Jewellery demand may soften at elevated levels, and reserve managers may slow accumulation simply because rising prices lift the value of existing holdings, but structurally gold remains relatively immune to higher prices compared with other metals.

From a technical perspective, gold’s 200-day moving average, currently near USD 4,250, remains major support. As long as that level broadly holds, the longer-term uptrend remains intact.

Silver: strong fundamentals, fragile conviction

Silver’s story is more complicated. After a relentless surge into January’s peak, the market became overextended. Tight physical supply, booming photovoltaic demand and speculative enthusiasm - helped along by social media-driven momentum - pushed prices to levels that increasingly required perfection to hold.

While a correction was already under way, the Iran war became the catalyst for a sharper reset. Higher oil prices strengthened the dollar, lifted inflation concerns and pushed rate-cut expectations further out, creating a much less supportive macro backdrop for precious metals. Silver, being more volatile and partly dependent on industrial demand, was hit harder than gold as longs rushed for the exit.

In many ways, however, that correction was healthy. It removed excess froth and speculative positioning that had left the market vulnerable. The long-term supply story remains supportive. The Silver Institute’s World Silver Survey 2026, produced by Metals Focus, forecasts a sixth annual deficit, with demand continuing to exceed available mine and recycled supply, forcing a further drawdown in above-ground inventories. As the survey notes, shrinking above-ground stocks leave the market vulnerable to bursts of reduced liquidity, volatile prices, elevated premiums and tighter lease rates. In addition, strong Chinese demand from the photovoltaic sector, as well as private investors, continues to underpin the market, while the current energy crisis may reinforce the push towards renewable energy, supporting solar-related silver demand over time.

That said, silver faces a more nuanced outlook than gold. Industrial demand remains exposed to cyclical weakness. A prolonged period of elevated inflation and slower growth could weigh on consumption from electronics, consumer goods and manufacturing. At the same time, investment demand - which is expected to play a major role in maintaining the market deficit - is notoriously fickle and can reverse quickly if technical momentum weakens or the macro narrative shifts.

This is why silver remains the higher-beta precious metal: greater upside potential, but also greater downside risk.

Relative outlook: gold first, silver second

Once the dust of war settles and energy supply chains begin to normalise, gold should once again find support from monetary demand, reserve diversification, fiscal concerns and continued geopolitical uncertainty. It is less exposed to cyclical demand destruction and less vulnerable to sharp swings in investor sentiment.

Silver remains fundamentally constructive, but its outlook depends more heavily on industrial demand resilience and continued investor participation. The market can still tighten materially, and under a bullish macro scenario silver may once again outperform gold. But that path is likely to remain volatile.

At current levels, the gold-silver ratio near 62 shows silver already trading relatively expensive versus its long-term average near 70, suggesting silver may need a fresh catalyst - whether tighter physical supply, stronger industrial demand or renewed speculative appetite - to materially outperform from here.

The bull market in precious metals looks paused, not over. Gold appears delayed, not derailed, with the long-term drivers behind the rally still firmly in place. Silver retains substantial upside over time, but after January’s excesses it remains vulnerable to macro setbacks and swings in investor conviction.

In short, gold remains the strategic allocation, while silver remains the tactical opportunity - higher risk, higher reward, and best handled with respect for its volatility.