Gold and Silver Set Fresh All-Time Highs as Chaotic Market Conditions Persist

 

Gold, Silver Set Fresh All-Time Highs as Chaotic Market Continues

(Bullion News Network) – The spot price of gold gained more than $60 per troy ounce on Monday, crossing $4,200 for the first time ever and setting a new all-time high. Silver also continued its historic run, adding nearly $2/ozt to its spot price and establishing a new historic peak. The price action heavily favored silver, driving the gold-silver ratio sharply lower to just over 79.20:1. That’s a 2025 low for the GSR, which has taken a beating over the past few weeks as silver prices continued to rise. Heightened demand for safe haven assets continued on Wednesday as the U.S. government logged the fifteenth day of what some analysts say could end up being the longest government shutdown in U.S. history. Meanwhile, platinum group metals moved in unison, with platinum gaining around $31 per troy ounce and palladium adding $25/ozt amid a chaotic precious metals market.

The big story of the week has been silver’s deep backwardation. Last week, silver entered backwardation, a state in which the asset’s spot price is higher than the price of its futures. Precious metals like silver are typically in contango, which means that the spot price of silver is almost always lower than the price of its futures. This is the default setup for the silver market because the costs of holding the metal (storage, security, etc.) are baked into the price of its futures. Skyrocketing demand for physical silver has led to an inversion of the typical setup, driving the spot price of silver considerably higher than the price of its futures. The differential between these two price quotes pulled back this week, but silver remains in relatively deep backwardation.

Physical silver shortages in London are at least partly behind the chaotic market event. Earlier this year, London exchanges shipped a large amount of physical silver to American markets as U.S. traders braced for a historic slate of tariffs put into place by U.S. President Donald Trump. One-month lease rates for physical silver rose considerably in October, climbing from an average of around 1% to a peak of over 39% last week. Lease rates pulled back a bit yesterday, driving silver prices lower, but Wednesday saw a resurgence as rabid demand continued to send shockwaves throughout global markets. Retail demand remained strong at midweek, but industrial and institutional demand continued to be more significant price drivers as intense competition for physical silver persisted. 

Retail investors and consumers may already be feeling some of the effects of the shortage. Rising prices and extreme lease rates have made it more costly for refiners to borrow silver, and large institutions need exchange-ready bars from refiners in order to deliver on expiring futures contracts. If these conditions continue, some market analysts expect a consumer-side shortage of high-purity products like silver bars and sovereign silver coins. At the peak of its backwardation setup, the silver market saw deep backwardation as extreme as in 1980 during the peak of silver’s historic run. Backwardation also occurred to a lesser extent during the price runs in 2011 and in 2020 during the COVID-19 pandemic. 

Gold prices also continued to climb, although Wednesday’s price action favored silver and drove the gold-silver ratio to a new 2025 low. Gold crossed $4,200 for the first time ever on Wednesday and is set to close at yet another all-time high. Safe haven demand drove gold prices throughout October as traders grappled with a range of geopolitical and economic uncertainties. The U.S. government shut down on October 1st after Republicans and Democrats failed to reach the 60 votes required to pass an appropriations bill. Precious metal prices gained consistently amid the shutdown, which continued into its 15th day on Wednesday. Some analysts say that this shutdown could become the longest in U.S. history. Currently, the longest government shutdown in United States history lasted 35 days during Donald Trump’s first term in office; it was caused by a dispute over the U.S. leader’s plans to expand the U.S.-Mexico border wall. 

Rate cut speculation also remained a powerful market driver throughout the first half of October. The Federal Reserve cut interest rates in September for the first time in 2025, reducing rates by 25 basis points amid mounting concerns about a cooling U.S. employment market. As of Wednesday, CME FedWatch quoted the probability that the Fed will vote to cut rates by another 25 bps at its October meeting at 97.8%, up from 97.3% on Tuesday, 94.1% a week earlier, and 74.3% on September 15th. Safe haven assets like gold and silver tend to appreciate as interest rates fall, primarily because cutting interest rates can be an inflationary policy change. The government shutdown prevented the release of several key economic data reports, but these reports could impact the likelihood of a rate cut once the shutdown ends and they become public. Namely, the FOMC is expected to look for more cracks in the labor market or signs that inflation remained largely unchanged before pulling the trigger on another rate reduction.

Platinum group metals gained on Wednesday, with platinum gaining over $30 per troy ounce as palladium added nearly $25 to its spot price. Speculation surrounding the Chinese green energy sector drove platinum group metals and silver prices higher throughout October. In September, China announced an ambitious plan to reduce its pollution numbers by 10% in the next decade, a move expected to supercharge the country’s already massive solar energy sector. Platinum and silver are both used in the production of solar energy cells, and both metals experienced a significant demand spike after China’s September announcement.

Silver’s price surge is likely to remain a major story in the precious metals market. A physical silver shortage in London, paired with the metal’s state of backwardation, has been a major event that could continue to shake things up for institutional and retail investors. Some analysts have claimed that silver’s deep backwardation could trigger a short squeeze, which would likely drive prices higher. At this point, it seems too early to say whether or not silver will continue to operate in this rare inverted setup. Meanwhile, more clarity from the White House on tariffs, a resolution to the government shutdown, and fresh economic data reports could all impact safe haven demand and the overall market outlook.