Summary
Gold has surged due to record central bank buying, investor demand, and geopolitical tensions. With both the U.S. and China now deleveraging, fears of global currency debasement are rising. This environment could support further gold gains, while silver remains well below its inflation-adjusted peak from 2011.
Gold is flying high. But can it keep defying gravity?
The global demand for gold has been rising since 2022. After Russian central bank assets were frozen in Europe, other central banks scrambled to pick up gold to protect themselves against something like this ever happening to them.
In fact, central banks bought more gold in the last 4 years than in the previous 21 years, as can be seen below.
Source: World Gold Council, DSP, Data As of June 2025
In contrast, silver has yet to reach its inflation-adjusted peak from 2011 and remains significantly lower than that peak.
Source: Bloomberg, DSP, Data As of June 2025.
But what’s noteworthy is that from a geopolitical perspective, there’s definitely a possibility that gold still has a fair bit of headroom left.
Why? Here’s one argument:
US policymakers are now beginning to seriously address their twin deficits: the trade deficit and the fiscal deficit.
The ongoing tariff war, though debatable in its execution, could potentially reduce the US trade deficit by slowing global trade and benefiting from a weaker US dollar.
There is also a growing recognition that the US needs to urgently address its debt problem, whether by borrowing less or servicing its existing debt better: the country’s total federal debt stood at around $36 trillion as of July 2025.
Historically, whenever the largest debtor nation (currently the US) attempts to deleverage (i.e. reduce its debt levels), a major creditor (such as China) offsets it by leveraging up (i.e. taking on more debt).
This time, however, China is also undergoing a deleveraging cycle. This raises serious concerns about global growth, with one likely outcome being a broad currency debasement (which might already be underway).
Such a scenario ought to benefit gold, as well as silver to a lesser extent.
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