(Kitco News) – Even though gold and silver prices continue to show near-term weakness, both precious metals still enjoy strong support from key areas of demand, and both offer unique advantages for investors’ portfolios, according to Kristy Akullian, Head of iShares Investment Strategy for the Americas at BlackRock.
Akullian noted that after gold and silver began 2026 with extraordinary momentum, the excitement surrounding the precious metals has faded. “Following a powerful rally that peaked in January, both gold and silver have pulled back as higher real yields, a stronger U.S. dollar, and profit taking weighed on performance,” she wrote in an analysis published Tuesday. “While near-term headwinds have emerged, many of the longer-term structural drivers supporting precious metals remain in place, leaving investors to weigh a more balanced outlook than earlier this year.”
Akullian then reviews the recent price action in gold and silver – and the support that still exists for the precious metals.
“Gold reached a record high above $5,000/oz in early 2026 before pulling back as higher real yields and a stronger U.S. dollar weighed on demand,” she noted. “While gold is down ~10% year-to date, its role as a potential portfolio diversifier and hedge against geopolitical and economic uncertainty remains relevant.”
“Silver has faced a more challenging backdrop in recent months after a positive 2025, with profit taking and macro headwinds weighing on prices,” Akullian said. “While silver is down year-to-date, its longer-term demand outlook continues to be supported by industrial applications tied to AI infrastructure, electrification, and solar.”
She said that both metals have experienced volatility in 2026 as investors have reassessed the outlook for interest rates, the dollar, and global growth, but she underlined that the long-term picture remains favorable. “While near-term macro headwinds have increased, the longer-term structural drivers supporting precious metals remain largely intact.”
Akullian pointed to three key drivers of the recent performance of gold and silver.
First, while mounting government debt has made metals attractive as a store of value, the focus has shifted from currency debasement to opportunities for growth.
“In the U.S., federal debt now exceeds 120% of GDP, while annual fiscal deficits continue to run near 6–7% of GDP,” she said. “And it’s not alone: global debt has surpassed 100% of GDP for major developed economies like Japan, the U.K., France and Canada as well.”
“Gold’s role as a potential store of value with no sovereign issuer risk has historically resonated in such environments,” she added. “Silver has often behaved as a higher-beta extension of this theme, though its pricing reflects a combination of investment flows and industrial demand. Over the past 20 years, silver’s annualized volatility has been up to twice that of gold, underscoring its more cyclical nature.”
Akullian noted that some of the macro forces that supported precious metals have moderated recently. “Concerns around U.S. fiscal sustainability have eased as economic growth rebounded, while a broader shift away from U.S. assets after reciprocal tariffs were announced in April 2025 has reversed, prompting a rally in the U.S. dollar,” she wrote. “That, combined with higher real yields, has prompted investors to unwind some of the so-called ‘debasement trades’, which has likely also weighed on digital asset performance.”
The second key factor is safe-haven demand driven by political and geopolitical uncertainty.
“Periods of policy transition and global re-alignment often increase demand for perceived safe haven assets,” Akullian said. “But rather than view precious metals purely as a haven, we believe they are best understood as portfolio stabilizers that have historically shown low or negative correlation to equities during periods of market stress.”
She said diversification can be even more important when equities are losing value. “Since 2020, during months when the S&P 500 declined more than 5%, gold has delivered an average return of 2%, while the U.S. Aggregate Bond Index has been closer to flat,” she noted. “This asymmetry makes gold particularly valuable in drawdown scenarios.”
The third major factor Akullian highlighted is the surge in industrial demand combined with low liquidity which fueled the rise of silver.
“Silver demand has reflected a more balanced mix of investment and industrial usage,” she said. “About 60% of annual silver consumption is tied to electronics, solar panels and semiconductors. Electronics alone account for roughly 445 million ounces of silver demand per year, making it the largest industrial use of the metal. The ongoing buildout of data centers, rising power demand from AI workloads, and broader electrification trends add a potentially cyclical and growth-sensitive component to silver.”
Turning to the outlook for the precious metals, Akullian said forecasting prices is particularly difficult given the lack of cashflow or future earnings to discount.
“With supply of precious metals finite, we focus on potential changes in demand as the primary drivers of performance,” she said. “From that vantage point, we believe the outlook has become more balanced. While higher real yields and a stronger U.S. dollar have created a more challenging backdrop for non-yielding assets in the near term, many of the structural demand drivers supporting precious metals remain intact. Even after the remarkable returns of 2025, we expect central bank demand for gold, industrial demand for silver, and other long-term structural trends to continue supporting the asset class, although returns are likely to be more moderate than those seen over the past year.”
Akullian noted that central bank gold purchases have reshaped the demand landscape with the yellow metal overtaking U.S. Treasuries as the largest share of global reserves for the first time in 30 years in 2025.
“Although purchases may moderate from the exceptionally strong pace seen over the past several years, central bank demand is likely to remain an important source of structural support for gold,” she said. “A 2026 survey found that 89% of central banks expect global gold reserves to increase over the next 12 months, while a record 45% plan to increase their own holdings, up from 43% in 2025 and 29% in 2024.”
“With economies like China and Brazil still holding less than 10% of their reserves in gold, data suggests that central bank buying has the potential to remain a key support driver.”
Akullian also pointed to the emergence of new gold buyers such as stablecoin issuers. “Tether, the world’s largest stablecoin issuer, has accumulated roughly 140 tons of gold, equivalent to the 33rd-largest gold reserve globally,” she said. “Stablecoins represent one of the fastest growing corners of the digital currency universe, having grown from $28 billion in 2020 to over $280 billion in 2025. Predictions for the further growth of stablecoins range from $1.9 trillion by 2030 for the base case to as much as $4 trillion under the bull scenario.”
“Further growth in stablecoins has the potential to lead to further demand for gold via two channels: i) Issuers like Tether choosing to further diversify some of their dollar dependence by holding more gold alongside bitcoin and U.S. treasuries; or ii) if investors start to migrate towards a greater preference for tokenized gold / “gold stablecoins” as an alternative to U.S. dollar stablecoins.”
Akullian also pointed out that gold ETF flows have remained positive, with global holdings “exceeding 4,000 tonnes and assets surpassing $650 billion” in 2025. “This continued growth highlights the role of ETPs as a preferred investment vehicle for gaining exposure to gold,” she said.
Turning to the silver outlook, Akullian highlighted the growing industrial demand for the gray metal, including its use in solar panels and AI data centers. “Global data-center computing capacity has expanded from about 1 gigawatt in 2000 to nearly 50 gigawatts today, supporting a large-scale buildout of silver-intensive computing infrastructure,” she noted. “Looking ahead, silver’s role in future technologies is expected to support structurally higher industrial consumption. Solar photovoltaic technology accounted for nearly 29% of total silver industrial demand in 2024, up from about 11% in 2014. Along with electric vehicles and expanding data center and AI infrastructure, solar power is expected to remain a key driver of silver demand growth through 2030.”
Akullian said that BlackRock sees gold and silver as more than just defensive assets. “Together in a portfolio, they can offer differentiated exposure: gold as a strategic diversifier and store of value, and silver as a higher-volatility metal with meaningful industrial demand,” she said. “Gold has historically functioned as a strategic ballast, particularly during equity market drawdowns, exhibiting low or even negative correlation to equities when diversification matters most. We believe this has made gold one of the most consistent diversifiers during periods of market stress, and a critical portfolio tool in a time where stock-bond correlations have proven unreliable.”
Silver, on the other hand, is more volatile and cyclical than gold. “While it has not consistently provided the same diversification benefits, we believe silver could offer greater upside potential during periods of economic expansion and industrial growth, although its higher volatility also brings greater downside risk,” Akullian wrote. “Its industrial applications, including in electronics and electrical infrastructure, also position silver to benefit from rising demand associated with AI infrastructure investment and data center buildouts. Given its higher volatility, allocations to silver have often been smaller than those to gold within diversified portfolios.
“Gold and silver can help investors seek to balance resilience with opportunity by pairing diversification with exposure to long-term structural demand.”
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