Prices of gold (GC=F) and silver (SI=F) increased on Tuesday, raising hopes that the record advance in precious metals may continue.
On Tuesday, gold futures increased by less than 1% to about $4,362 per ounce. Following their largest daily decline since 2021, silver futures saw an 8% increase. Both metals are expected to record their biggest yearly increases since 1979.
Amidst efforts to onshore manufacturing and a global AI race, platinum (PL=F) and copper (HG=F) have also been trading close to record levels.
Josh Phair, founder and CEO of Scottsdale Mint, a distributor and maker of precious metals, told Yahoo Finance, "We're in a metals war."
Phair noted that after last year's 27% increase, central bank purchases of gold had raised prices 68% year to date, marking the beginning of the trend for nations to safeguard metal resources.
Since the US added silver and copper to its list of key minerals, which are deemed essential to the US economy and national security, their prices have also skyrocketed.
"These data centers that are getting created so fast in the United States, the US has to have to protect its position in the world," Phair stated.
Concerns about a shortage are heightened by the fact that China, the third-largest silver mining nation, is anticipated to impose restrictions on silver exports beginning on January 1. "China is limiting its exports. This implies that the metal will need to be found somewhere else in the planet," Phair stated.
According to the Silver Institute, a trade association, about 60% of the world's silver is utilized for industrial purposes, such as solar panels, data center parts, and electric car batteries.
The need for silver was highlighted in October when Samsung (005930.KS) inked a $7 million deal to ensure future supplies from a Mexican mine.
Phair said that silver is still "cheap" when accounting for inflation, despite some analysts' warnings of a "stretched trade" in precious metals.
"Silver's probably been too cheap for a long time, and that's the other driver of this," he stated. "If you adjust the old high of $50 in 1980 for inflation, it's over $200," he continued.
Therefore, you could even argue that these costs are still rather pitiful today. This year's increase in metal prices coincides with an almost 10% decline in the value of the US dollar (DX-Y.NYB) and three interest rate reductions by the Federal Reserve in 2025.
