Whalesbook
Gold and Silver Head for Historic Annual Gains
Gold and silver are on track for their most significant annual performance since 1979, a remarkable feat driven by a confluence of global economic and geopolitical factors. Despite experiencing a notable pullback this week, with silver losing nearly 9% on Monday and gold seeing its largest single-day drop since October, the overall annual trend remains exceptionally strong.
Factors Driving the Rally and Recent Volatility
The upward momentum in precious metals has been fueled by several key elements. Increased geopolitical tensions in the Middle East and other Asian regions, coupled with uncertainties surrounding US tariffs, have historically boosted demand for gold as a safe-haven asset. This year, these factors played a crucial role in the first half of 2026.
However, a recent surge in volatility was triggered by the Chicago Mercantile Exchange (CME) Group. The world's leading derivatives marketplace significantly increased margin requirements on gold and silver futures contracts. This move prompted widespread profit-taking among investors and led to substantial portfolio rebalancing, explaining the sharp, albeit temporary, decline in prices seen early in the current week.
Silver's Unique Market Dynamics
Silver has experienced its own set of market pressures and supportive factors. The metal's price jump recently occurred just two months after a significant market squeeze in London. This squeeze was caused by strong inflows into silver Exchange Traded Funds (ETFs) and high export demand to India, which depleted already critically low inventories. While London's vaults have since seen recovery, a substantial portion of available silver remains in New York, pending the outcome of a US investigation into potential tariffs or trade restrictions.
Adding further positive sentiment for silver, China announced a policy change regarding export curbs on processed silver, effective from the start of January. This measure is expected to further tighten the global supply picture.
Expert Outlook for the Coming Weeks
Maneesh Sharma, AVP - Commodities & Currencies at Anand Rathi Shares and Stock Brokers, offers a cautiously optimistic outlook. For the short term, both gold and silver are expected to remain steady with limited downside potential as strong underlying fundamentals continue to support market sentiment heading into the new year. "Gold & Silver may remain steady with limited downside seen towards the start of new-year as strong fundamentals to drive sentiments," Sharma notes.
Looking at the weekly view, Sharma suggests a "Positive Bias" for Spot Gold. For Silver, the recommendation is to "Buy on Dips," with prices anticipated to regain momentum and potentially retest the $80 per ounce level in the coming weeks. This strategy is underpinned by projections of the global silver market witnessing its fifth consecutive year of supply deficit, with estimates suggesting these deficits could widen in 2026 to roughly 8-10% of annual consumption.
Navigating Volatility Towards Year-End
China's export curbs are estimated to cause an incremental loss of 400-500 tonnes for the next year, potentially increasing the deficit by about 1-1.2% and keeping sentiments positive for silver. However, with a holiday-shortened week ahead, trading volumes may remain low. Key macroeconomic cues, including the minutes from the FOMC meeting, will also be in focus. Volatility could rise towards the start of the new year, making it prudent for investors to continue buying on dips for favourable investment in precious metals.