Volatile Gold and Silver Spike as US-China Trade War Whacks Stocks, Bitcoin

Precious metals experienced significant volatility, with gold and silver reaching new record highs before pulling back, driven by an escalating US-China trade war that is also impacting global stock markets. Silver saw substantial investment inflows into ETFs and faced unprecedented borrowing costs disrupting supply chains, while analysts like Societe Generale and Bank of America raised gold price forecasts to $5000 for 2026, citing macroeconomic tailwinds. Despite strong demand and bullish analyst sentiment, some market participants noted increased physical selling and anticipated more neutral bullion price behavior, as broader market sentiment showed fund managers bullish on equities but concerned about overvaluation, and Bitcoin declined despite recent institutional adoption news.

Analysis

Precious metals, gold and silver, experienced significant volatility, with silver spiking 85% and gold 60% since early 2025, reaching new record highs before pulling back. This surge is primarily driven by an escalating US-China trade war, characterized by new 100% US tariffs and China's retaliatory business bans, which has simultaneously triggered a slump in global stock markets. Silver's high-to-low movement of 7.8% over two days underscores the extreme market conditions.

The silver market is exhibiting a pronounced liquidity squeeze, with SLV ETF inflows requiring an additional 310 tonnes of bullion and lease rates remaining at unprecedented levels, disrupting supply chains. Concurrently, major financial institutions like Societe Generale and Bank of America raised their 2026 gold price forecasts to $5000 per ounce, citing robust ETF flows, resilient central bank buying, and supportive macroeconomic factors such as fiscal deficits and a push for rate cuts amid 3% inflation. This bullish outlook contrasts with observations of increased physical selling from retail investors.

While global fund managers are reportedly the most bullish on equities since February, a significant 60% of surveyed investors perceive global equities as overvalued, and 54% view AI-related assets as bubble territory. Bitcoin, despite recent institutional adoption news, declined 8.9% to a one-month low, diverging from the precious metals rally and reflecting broader market uncertainty following the tariff announcements.

Key Decisions for Investors

• Investors should closely monitor the escalating US-China trade war for its continued impact on global markets and potential further support for safe-haven assets like gold, while also assessing the sustainability of gold's institutional demand against increasing retail selling.
• Given the significant liquidity squeeze in silver and unprecedented lease rates, evaluate potential supply chain risks and their implications for industrial demand and pricing.
• Re-evaluate equity allocations, particularly in AI-related assets, considering the widespread investor concern regarding overvaluation despite overall fund manager bullishness.
• Consider Bitcoin's recent underperformance despite positive adoption news as a signal of its current sensitivity to geopolitical tensions, challenging its role as a reliable uncorrelated asset in this environment.