Market prices and technical picture

Gold's current price of $3,287.65 (May 12, 2025) represents a remarkable 31.2% six-month gain, despite pulling back 4.1% from its all-time high of $3,500 reached in mid-April. Silver trades at $32.43, rising 18.6% over six months but dropping 5.2% from its recent high. Both metals remain in primary uptrends, trading above key moving averages:

• Gold 50-day MA: $3,151
• Gold 200-day MA: $2,950
• Silver 50-day MA: $31.20
• Silver 200-day MA: $29.40

Technical indicators suggest consolidation rather than a trend reversal. Gold's RSI at 67.03 approaches but hasn't reached overbought territory, while silver's more modest 58.12 reading indicates further upside potential. Both metals show decreasing MACD momentum, consistent with normal consolidation after steep rallies.

Support levels have held well during the recent correction. Gold's immediate support at $3,200 remains intact, with further support at $3,120 and the $3,049-3,034 zone. Silver has established support at $31.50, with additional levels at $30.00 and $29.00.

Economic backdrop favors precious metals

The economic environment has turned increasingly favorable for precious metals. Q1 2025 GDP contracted by 0.3% – the first negative quarter since early 2022 – primarily due to surging imports ahead of tariff implementation and decreased government spending. While inflation has moderated to 2.3% year-over-year (April 2025), core inflation remains sticky at 2.8%.

The Federal Reserve has maintained its benchmark rate at 4.25-4.5% since December 2024, adopting a cautious "wait-and-see" approach regarding the impact of tariffs on the economy. Markets are currently pricing potential rate cuts for later in 2025, with the first cut anticipated in July or September.

President Trump's trade policies have emerged as a significant market factor, with recent temporary agreements reducing Chinese tariffs to 30% from the initially announced 145%. Economists project these tariffs could push core inflation to 3.5% by year-end, reinforcing gold's appeal as an inflation hedge.

Central banks continue historic gold accumulation

Central bank gold purchases reached 244 tonnes in Q1 2025, representing the 16th consecutive year of net purchases. While this reflects a slower pace than Q4 2024, it still exceeds the five-year quarterly average by 24%. Most notably, only 22% of Q1 central bank demand was publicly reported, suggesting substantial "stealth buying" by sovereign institutions.

Leading purchasers in Q1 included:

• National Bank of Poland: 49 tonnes (bringing holdings to 497 tonnes)
• Reserve Bank of India: 19 tonnes
• People's Bank of China: 13 tonnes (continuing a 17-month buying streak)
• National Bank of Kazakhstan: 6 tonnes

This continued central bank accumulation reflects ongoing de-dollarization trends and desire for reserve diversification amid geopolitical uncertainty.

Record investment flows into precious metals

Global gold ETFs recorded unprecedented inflows in April 2025, adding $11 billion – the strongest monthly inflow since March 2022. ETF holdings reached 3,561 tonnes with total assets under management hitting $379 billion, a new month-end peak. This surge fueled a 170% year-over-year increase in total investment demand in Q1 2025.

Regional investment patterns reveal:

• North American ETFs: Robust demand after 2024 slowdown
• Asian ETFs: Record inflows, particularly from Chinese investors
• European ETFs: Mild outflows in April but positive year-to-date

Trading volumes have surged, with global gold trading averaging $441 billion daily in April 2025 (48% higher month-over-month). COMEX gold futures positions show some profit-taking, with total net longs falling 30% to 566 tonnes by end-April, suggesting room for additional institutional buying.

Supply-demand fundamentals remain constructive

Global gold mine production reached a Q1 record of 856 tonnes, slightly above the 853.4 tonnes produced in Q1 2024. Notable production increases came from Chile (+45% YoY), Ghana (+11%), and Canada (+4%). China remains the world's largest producer at approximately 370 tonnes annually, followed by Australia (310 tonnes) and Russia.

Counterintuitively, gold recycling supply declined by 1% year-over-year despite record prices, as "consumers held onto their gold hoping for higher prices," according to World Gold Council analysis.

Silver mine production is projected to hit a seven-year high in 2025, rising 2% to 844 million ounces. This growth comes primarily from operations in China, Canada, Chile, and Morocco. Silver recycling is expected to increase 5% in 2025, exceeding 200 million ounces for the first time since 2012.

Total gold demand reached 1,206 tonnes in Q1 2025, the highest first-quarter figure since 2016. While jewelry demand weakened significantly due to high prices, this was more than offset by investment demand, which more than doubled (+170% year-over-year) to 552 tonnes.

The silver market is forecast to remain in deficit for the fifth consecutive year in 2025, with an expected shortfall of 149 million ounces. While smaller than 2024's deficit, this continues a pattern that has seen cumulative deficits of 678 million ounces from 2021-2024 – equivalent to 10 months of global mine supply.

Physical markets show regional divergence

Physical bullion premiums have remained relatively stable despite high prices:

Regional physical buying shows significant divergence:

• Chinese investors posted their second-highest quarter of retail investment in Q1 2025
• Indian demand remains highly price-sensitive, weakening as prices rise
• Western physical demand has shifted toward ETFs and away from direct ownership
• U.S. physical demand hit a five-year low in early 2025 despite record prices

Major retailers have reported changing buying patterns, with Costco becoming a significant market participant, reportedly selling "$100 to $200 million of gold per month" according to industry sources.

Unusual market correlations emerging

Traditional asset correlations have shifted significantly, with gold showing an unusually strong positive correlation with both equities (+0.30 to +0.45) and Bitcoin (+0.67 to +0.70). This represents a departure from historical patterns where gold typically moved inversely to risk assets.

Silver's industrial nature creates even stronger correlations with equities (+0.44 to +0.50) and general commodities (+0.60 to +0.70), reflecting its dual role as both precious metal and industrial input.

The weakening negative correlation between gold and the U.S. Dollar Index (-0.11 to -0.20) suggests other factors – inflation concerns, geopolitical risks, and central bank buying – currently dominate price action more than currency movements.

Geopolitical landscape supports precious metals

Multiple geopolitical factors continue supporting precious metals prices:

Bullish expert forecasts for remainder of 2025

Major financial institutions have issued increasingly bullish forecasts for precious metals:

Gold Price Forecasts:

• Goldman Sachs: $3,700/oz by end-2025 (recently raised from $3,300)
• JP Morgan: $3,675/oz average for Q4 2025, exceeding $4,000 by Q2 2026
• Bank of America: $3,063/oz average for 2025
• Citibank: $3,500/oz three-month target, $3,000/oz six-to-twelve month target
• UBS: $3,500/oz by end-2025

Silver Price Forecasts:

• JP Morgan: $39/oz by end-2025, with a "catch-up window" expected in second half of 2025
• Bank of America: Rising to $35/oz by 2026
• Citibank: $40/oz six-to-twelve month target
• Analyst consensus: $35-40/oz range by year-end

Conclusion

The precious metals market demonstrates remarkable strength in 2025, with gold's outperformance creating both opportunities and anomalies. The extreme gold-silver ratio of 101:1 suggests potential for silver to outperform if industrial demand strengthens in the second half of the year. While short-term consolidation appears likely given the steep year-to-date gains, the underlying fundamentals – central bank buying, ongoing supply deficits, inflation concerns, and geopolitical tensions – continue supporting the primary uptrend for both metals. Market participants should closely monitor Federal Reserve policy, tariff implementation timelines, and central bank purchasing behavior as key drivers for the remainder of 2025.