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December 28, 2025
On 8th October 2025, gold prices reached a record high of $4000 per ounce. There was another rally in gold market with gold price hitting $4300 per ounce on 17th October 2025. Also, silver has experienced a remarkable rally in 2025, with substantial price gains across major global markets. In an era of economic uncertainty, geopolitical events and sovereign regulatory shift, US market has experienced high volatility while the commodity market has experienced a surge. It appears that commodity market represents a haven for worldwide investors, institutions and government, which we will analyze in the following report from a sovereign regulation perspective. Commodity Market – Gold Commodity market is a market where raw primary goods are traded. These are usually natural and agricultural resources like precious metal, oil, and corn. One of the biggest commodity markets is gold. Due to its rare presence and limited supply, value of gold has been appreciated considerably over the past decades. Under periods of high inflation, economic uncertainty and capital market volatile environment, gold has once again emerged as a great tool as a haven store of value. In the 3Q 2025 Financial Review Conference Call on 5 November, the board members did not respond to the acquisition rumours as expected by investors. It is believed that the acquisition is still in the stage of discussion. Surge of Gold Market from a Sovereign Perspective In October, gold price has reached a record high of $4000 per ounce due to market volatility raised by the uncertainty of Federal Reserve rate cut movement and tariff policy proposed by Donald Trump. Market volatility rises as investors allocate more capital in gold market to protect themselves from market crashes. In the following, we will analyze the surge of gold market from another perspective – sovereign perspective.
Federal Reserve Rate Policy:
There were two federal fund rates cut recently in September and October, each with 25 basis points. It caused a drop from 4.25% to 3.75%. The probability of a further rate cut to 3.5% in December is higher than 60% as implied by Fed fund futures price. Given the rate cut, it will have paramount effect on surge of gold price. From a national perspective, governments around the world used to allocate a large proportion of US treasury bond in their reserve portfolio as it is a nearly risk-free asset. However, the rate cut has caused the US dollar and US treasury bonds to be less attractive with a lower interest rate and depreciation of US dollars. National governments and central banks may shift allocation from US dollars to gold to strengthen their foreign reserves and maintain financial stability, leading to surge in gold prices.
De-Dollarization:
De-Dollarization refers to reduction in the flow of US dollars by financial institutions and economy for world trade and federal reverse currency. De-dollarization caused a higher allocation to gold reserve instead of US dollar as a reserve. Apart from rate cuts as mentioned before, there are other events as well leading to call for De-Dollarization. In president election year, Donald Trump imposed sanction on Russia citing war between Russia and Ukraine as a reason and slapped tariffs to the countries worldwide like India, Malaysia, and China. Massive sanction on Russia caused BRIC countries (Brazil, Russia, India, and China) to replace the dollar as the reserve currency. This caused the effected countries to look for alternatives and reduce dependence on dollars for trade. Gold serves as an alternative to dollars as reserve and that is why surge of gold market is backed by global demand. Commodity market – Silver: A Sharp Quantitative Surge From January to October, London Silver Spot prices soared 68.4%, while New York Silver Futures jumped 64.73% and the Shanghai Silver Main Contract rose 53.16%. By mid-November, London Silver Spot hit $54 per ounce, approaching the October high of $54.468 per ounce, and Shanghai Silver Futures peaked at 12,600 yuan per kilogram. Despite a mild pullback on November 14—New York Silver fell 1.03% to $52.625 per ounce and Shanghai Silver dipped 0.04% to 12,351 yuan per kilogram—the year’s overall upward trend remains firmly intact. Factors Behind the Rally in Silver Market Three core drivers underpin this significant price surge: 1. Supply Constraints: Global silver supply in 2024 stood at 32,900 metric tons, with 2025 projections showing a mere 3% increase to 33,900 metric tons. This rigidity stems from long mining cycles (8-15 years) and declining ore grades, while London Silver inventories have plummeted 75% from historical peaks, creating severe market liquidity shortages.
2. Dual Demand Growth: Industrial use, accounting for 61.8% of total demand, is boosted by the expansion of solar energy and AI industries—electronic sector demand alone rose 4.5% in 2024. Investment demand has also surged as a hedge against economic uncertainty, with ETF inflows exceeding 300 metric tons in a single week, and silver’s classification as a critical mineral by the U.S. government has triggered strategic hoarding.
3. Macroeconomic Tailwinds: Expectations of Federal Reserve rate cuts and lingering geopolitical tensions have amplified silver’s safe-haven appeal which is similar to the gold market.
Conclusion - Future Impact and Outlook
In the short term, gold and silver is likely to trade sideways with upside momentum. If the Fed implements rate cuts in December, for example silver prices could test 13,000 yuan per kilogram (Shanghai) and $60 per ounce (New York). However, significant risks persist where delayed rate hikes or a global recession could trigger 30-50% corrections, echoing historical volatility patterns. Long-term, sustained industrial demand from sovereign government, renewables and electronics will provide price support, but supply rigidity will limit sharp gains beyond 2026. Investors are advised to avoid chasing short-term highs, as shifts in market sentiment and liquidity could lead to abrupt price swings.