Gold and silver hit new historical highs again, poised for the largest annual increase since 1979, with two major drivers playing a significant role.

Heightened geopolitical tensions and expectations of further interest rate cuts in the United States have driven both gold and silver prices to reach historical highs. On Tuesday, New York time, spot silver rose by a maximum of 3.7% to reach a high of $71.58 per ounce, setting a new record. This is the first time silver has surpassed $70 per ounce. Gold almost broke through $4500 per ounce, reaching as high as $4499.85, setting a new high with a daily increase of 1.27%. Platinum and palladium prices also rose simultaneously. Traders are betting that the Federal Reserve, after three consecutive rate cuts, will cut rates again next year, which will be good for non-interest-bearing precious metals. Additionally, escalating geopolitical tensions in the past week have strengthened the safe-haven appeal of gold, particularly in Venezuela. The United States has imposed a blockade on oil tankers from the country and continues to put pressure on President Nicolas Maduro's government. Media reports indicate that Ahmad Assiri, a strategist at Pepperstone Group, stated that geopolitical frictions are back in the market narrative. He mentioned the seizure of oil tankers and stated that while these developments have not yet triggered widespread risk aversion, they have undoubtedly increased the background demand for gold as an important hedge asset. Gold ETF total holdings have been rising every month Gold prices have risen by more than two-thirds this year and are set to deliver the best annual performance since 1979. Factors supporting this rise include continued large purchases by central banks around the world and funds flowing into exchange-traded funds (ETFs). According to data from the World Gold Council, total holdings in gold ETFs have been rising every month this year except for May. Analysts note that a series of aggressive measures taken earlier this year by U.S. President Trump to reshape the global trade system, as well as his threats to the independence of the Federal Reserve, have fueled this bull market. Investors are also being driven by the so-called "currency debasement trade," which involves concerns that expanding debt could erode long-term value, leading them to move away from sovereign bonds and their denominated currencies. Strong buying in ETFs is one of the main drivers behind the significant rise in gold prices. The world's largest precious metal ETF, the SPDR Gold Trust under the iShares Group, has seen its holdings increase by over a fifth this year. An economist at Muthoot Fincorp stated that over the past few months, inflows into gold ETFs have mainly come from retail investors rather than institutional investors. He pointed out that due to the lower stickiness of retail funds, price volatility is likely to remain at higher levels. Previously, when gold prices retreated from their interim high of $4381 per ounce in October, there were concerns in the market that the rally was overheated. However, gold prices quickly rebounded and are now poised to continue their rise into next year. Goldman Sachs is among several banks predicting that gold prices will continue to rise in 2026, with a benchmark scenario of $4900 per ounce and a greater upward risk. Silver shines brighter than gold Silver has risen by about 140% this year, outperforming gold. Recent gains have been boosted by speculative fund inflows, while ongoing supply mismatches in major trading centers following the historic short squeeze in October have also pushed up prices. In India, buyers have imported large quantities of silver, driven by the Hindu festival of Diwali. At the same time, global silver ETF holdings have continued to climb. This surge in demand has collided with tense inventory levels in the London benchmark market, leading to supply constraints in the market. Subsequently, silver inflows into London vaults have significantly increased, but a majority of globally available silver is still concentrated in New York. Traders are awaiting the results of an investigation by the U.S. Department of Commerce, which assesses whether critical mineral imports threaten national security, and the results could lead to tariffs on silver or trade restrictions. Meanwhile, in China, silver stockpiles in warehouses linked to the Shanghai Futures Exchange dropped to their lowest level since 2015 last month. In addition to its financial asset properties, silver is deeply embedded in the global supply chain and is widely used in electronics, CECEP Solar Energy battery panels, and medical device coatings. According to data from the Silver Institute, global demand for silver has exceeded mine production for the fifth consecutive year. Analysts: $4500 and $70 price levels not difficult to break through From a technical standpoint, the relative strength index for gold has entered overbought territory, with readings exceeding 80 as of Tuesday. Silver is currently close to 80 as well and has maintained high levels for about two weeks. Typically, readings above 70 are considered overbought signals. However, this has not deterred investors. Assiri of Pepperstone stated that there has not been a significant influx of sell-side orders in the market, and instead, gold and silver have continued to attract buying interest during the upward trend. He pointed out that this behavior indicates that $4500 and $70 are more like reference points in the trend, rather than ceilings that are difficult to break through. Therefore, at least for now and during the holidays, both metals continue to receive solid support.