Why gold and silver prices have added $5 trillion in value

Gold and silver prices soared in late August, marking an impressive 15% and 19% increase respectively. The combined metals market value added nearly $5 trillion, according to Bull Theory analysis. Despite staying below earlier year highs, the metals' rise can be attributed to various factors. Monetary policy interventions, geopolitical tensions in the Middle East, and persistent global inflation have fueled the surge.

The U.S. Treasury's decision to double its long-term bond buyback program to $4 billion per session triggered speculative buying and aggressive short-covering in precious metals markets.

Gold is seen as the primary global safe-haven asset due to the ongoing Iran conflict, which has driven up energy prices. Silver's dramatic outperformance is due to a physical supply deficit and increasing industrial demand from AI data centers, electrical grid modernizations, and advanced electronics. Truist's Keith Lerner upgraded gold to neutral, noting that real yields have stabilized and the Treasury's bond purchases may ease upward pressure on rates.

Technical trends have improved, with gold reclaiming its 200-day moving average. Central bank demand remains resilient, with recent data showing continued gold purchases. A softer U.S. dollar backdrop due to cooling inflation, softer payrolls, and a dovish Federal Reserve has also supported gold. While the conditions are favorable for gold to stay strong, reaching earlier year highs around $5,300 an ounce is more challenging.