Gold and silver at record highs mean the world is heading for bigger crises? Lessons from history

The prices of gold and silver have hit record highs, in a pattern seen throughout 2025. This reflects the risk-averse sentiment of investors, who have amassed gold and silver. Its been the pattern in past decades too, with the price of gold rising in anticipation of, and during, crises. The current high prices, particularly since the Ukraine–Russia war of 2022 onwards, could indicate that the gloom and doom is likely to continue in 2026, if one goes by historical precedents.

The rise of gold and silver in 2025

Gold, which was around $2,624 per ounce at the start of 2025, is at a record high of around $4,400 per ounce by late December, a rise of around 68 per cent on the year. Silver is up from $29 per ounce to $69 per ounce, an even higher spike of 133 per cent on the year. This is one of the biggest annual rises for both metals since 1979.

Gold and silver: Safe-haven assets amid uncertainties

Investors flock to these so-called safe-haven assets when geopolitical tensions continue, most of which have a direct impact on oil prices: the Ukraine–Russia war, US–Venezuela tensions, and conflicts in the Middle East, particularly the Gaza war.

Silver is not only a safe haven, but also has strong industrial use in current technologies such as electric vehicles, solar energy and electronics.

US tariffs under President Donald Trump, and trade wars have added to the uncertainties. There are also fears about inflation, both in the US and elsewhere. One of the longest US government shutdowns exacerbated the situation.

Interest rate cuts by central banks make gold more attractive

The US central bank, the Federal Reserve, made several interest rate cuts in 2025, with more such cuts likely in 2026.
Such interest rate cuts are leading more investors to opt for gold. When central banks cut interest rates, assets like bonds and savings become less attractive because they stop giving good yields to investors. Therefore, rate cuts often increase the demand for gold - which is a non-yield asset - as an alternative investment, boosting its price.

Central banks, like the Reserve Bank of India, are also adding to their gold reserves, which crossed 880 metric tonnes by late 2025, as against 820 MT in mid 2024.

A pattern in history: How precious metals rise ahead of and during global shocks and tensions

Historically, investment in gold has risen as a hedge against ongoing uncertainties and as a way to counter the lowering of currency values.

There is a clear pattern in which the prices of gold, and often silver to a lesser extent, rise ahead of or during major shocks such as wars, oil crises or economic turmoil.

Gold often behaves like an earthquake predictor, surging beforehand as investors price in risk. It stabilises or dips as the crisis resolves.

Gold price spike patterns since 1973

After the Yom Kippur War and the OPEC oil embargo of 1973, oil prices quadrupled, causing both stagflation and inflation in America and globally. Gold price doubled from around $100 per ounce to over $200 per ounce by 1974. This was in anticipation of the crisis amid the fall in value of the dollar, the world’s reserve currency.

The next big rise in gold prices was during the 1979–1980 oil crisis that came after events such as the Iranian Revolution and the Soviet invasion of Afghanistan. That ‘oil shock’ led to high inflation, and gold peaked at around $850 per ounce. This remains the strongest bull run in gold connected to geopolitical shocks.

The next big spike in the yellow metal took place during the Gulf War of 1990–1991, following Iraq’s invasion of Kuwait. Gold rose by around 20 per cent.

The US invasion of Iraq in 2003 was another growth point for gold, which got sustained gains by around 50 per cent during the conflict that followed.

During the global financial crisis of 2008, which followed the collapse of subprime mortgage market in the US, gold saw a period of growth until around 2009. Amid the disruption of global banking and stock crashes across the world, gold surged by around 25 per cent, in a classic case of a safe-haven response.

The next big spike for gold was during the Covid pandemic that started in 2020. Global lockdowns and the shutdown of entire national economies led to a then-record growth in gold prices of nearly 27 per cent, to about $2,000 per ounce.

Uncertainty about the economic future of the world, combined with stimulus packages by various governments, drove demand for the precious metal.

Gold prices are a predictor of impending global tremors

The current rally in gold is mainly due to the Russia–Ukraine war and other conflicts, and talk of another world war, which is yet to materialise. Geopolitical crises add a premium to gold prices, which grow as a pre-emptive measure to absorb shocks. Investors usually sense rising anxiety and risk before it becomes fully visible.

That explains why gold, which was at around $2,624 at the start of 2025, rose with each shock this year: from the initial tariff threats by Trump, to the “Liberation Day” tariff announcements, to trade tensions with various countries and US sanctions on Venezuela. As mentioned, the US government shutdown, the Ukraine–Russia war amid a failing peace process, ongoing Middle East tensions and supply-chain disruptions are all adding to the rise.