Gold, Silver To Shine Brighter? Precious Metals Rally May Continue | The Reason Why

Have you told your grandmother that her portfolio of jewellery outperformed your SIPs this year? I am sure her heirloom got a lot more valuable, thanks to the precious metals rally. Gold is up by 60%, platinum by 90% and silver broke all records by nearly doubling this year. On the contrary, the Nifty 50 Index gained 10% and the MSCI World Index 20%.

Somewhere out there, I feel sad for a whole generation of youngsters, regretting the day they lectured their parents about “keeping too much gold” or even convincing them to sell jewellery and buy equities. I can imagine their ‘I-told-you-so’ stare.

The uncomfortable part? I’m here to say that this run may be far from over. The precious metals rally wasn’t a fluke. It reflected the changed economic world - from geopolitics to energy transitions to central bank behaviour.

Economics 101 teaches us that when the prices increase, the supply also rises because it’s more profitable for the producer to make more goods. But the economics of precious metals is a bit different, more complex than the theory. Even at higher prices, the supply is not improving. Why? Let’s understand.

Central banks in China, India, Turkey and others kept buying gold after the Western countries froze Russian assets. They asked: What if this happens to us? And the answer was straightforward – they needed to diversify their reserves away from the dollar, and gold became that instrument.

Their steady demand created a strong price floor. At the same time, the US dollar weakened as markets expected Fed rate cuts. Gold is mainly a monetary metal, with about 4,500 tonnes supplied each year, of which 30% comes from recycling. But the supply barely grows because approvals take years, and discoveries are rare.

Therefore, even this year’s rally doesn’t boost output quickly, as building a mine takes 7–10 years. So gold reacts much more to demand, especially from investors and central banks, than to price. In 2025, gold crossed $4,000 an ounce (oz) while production costs stayed near $1,600. 1 ounce is around 28 grams.

That means a big margin jump for the gold miners. But such margins didn’t lead to new supply because the geological and regulatory hurdles are too high. WisdomTree calls gold “structurally scarce,” meaning high prices tend to be lasting, and not temporary.

Margins for silver miners have jumped sharply in 2025, crossing $19/oz — the highest in more than a decade — thanks to silver trading above $50/oz. Yet silver production is still restricted because 70% of global output comes as a by-product from the mining of base metals like copper, lead, zinc, etc.

And on the primary side, new silver-only discoveries are rare. So even with excellent margins, miners simply cannot increase production fast enough. The global supply of silver is stuck near 1,000 million ounces annually, with 15–20% coming from recycling, and even that depends on scrap availability.

In 2025, the demand for silver remained more than its supply by 150 million ounces. This is the fifth consecutive year with a silver shortage, at a time when electric vehicles, semiconductors and solar panels demand more silver.

Platinum is one of the most supply-fragile metals in the world. About 70% of global output comes from South Africa and another 10–12% from Russia, which makes the market heavily exposed to power shortages, labour strikes, deep mining challenges, and geopolitical risks.

Many South African mines operate near breakeven due to high electricity costs and difficult geology, which is why global platinum supply has barely grown in two decades. Therefore, even when prices rise, miners struggle to increase production.

This is the third year of a platinum deficit – demand is higher by 692 kilo oz than supply in 2025. In 2026, the World Platinum Investment Council expects the conditions to improve with a very small 20 kilo oz surplus.

It notes that South African production will stabilise, while the demand will reduce by 6% mainly due to investor profit-taking and easing US trade tensions.

Looking ahead, 2026 is expected to be a year of moderated but sustained strength. Major institutions — including Deutsche Bank, Goldman Sachs, and UBS — anticipate gold prices in the $4,400–$4,900 range, silver between $50 and $65 depending on industrial demand intensity.

However, platinum may see a more moderate upside. Finally, Mother Nature is the sole decision maker in this market. Where to find them, how deep they are, how rich they are, how costly it is to extract, how much metal the world can get, and so on — no matter how high the price goes.

The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.