Why do gold and silver continue to reach record levels?

The global rally in precious metals continued on Tuesday, reflecting a series of concerns on the part of investors.

In the spot markets, gold reached an all-time high of $4,186 per ounce, while silver hit a new record high of $53.59 per ounce. Precious metals pulled back from those highs later in the session, but gold and silver remained up 12% and 21% respectively in just the past month.

Tuesday’s trading followed a Monday session in which nominal silver futures surpassed an all-time high set in 1980, when the Hunt brothers attempted to monopolize the global silver market. Silver is now up 78% year to date, while gold is up 58%.

Uncertainty abounds

Long viewed as an investment hedge against economic turmoil, precious metals have soared in a global environment plagued by a myriad of uncertainties.

And at the top of the list lately: global trade tensions. Last Friday, President Trump rocked global markets by warning of increasing tariffs on China by 100% by November 1st. His warning came in response to China’s decision to limit exports of rare earth minerals used in a range of technological and industrial applications.

On social media, Trump appeared to soften his tone. But on Tuesday, China imposed sanctions on five US divisions of South Korean shipping company Hanwha Ocean Co, and both the US and China began imposing port fees on the other’s ships.

In its latest global economic outlook released on Tuesday, the International Monetary Fund cited a volatile environment and new policy measures for the “bleak” global outlook and weak growth.

Meanwhile, the US government shutdown is about to enter its third week. Furloughs and layoffs of some government employees have begun, threatening overall consumer spending and economic growth.

The shutdown also delayed key employment and inflation reports as the Federal Reserve considers another interest rate cut at the end of October. Lower rates generally favor precious metals, which do not produce regular income as bonds do.

Additionally, although stocks remain near record levels, recent market volatility — especially since Trump’s statement on Friday — appears to have helped precious metals.

Equity investors appear to be increasingly concerned about an AI stock bubble, which may direct some investors towards other assets. Global fund managers surveyed by Bank of America last month identified concerns about an AI bubble as the biggest stock market risk, with a majority seeing AI stocks already in that territory.

The same Bank of America survey indicated that fund managers view “Long Gold” as the most actively traded, surpassing the “Long Magnificent 7.”