Exuberant chase for high returns in metals, crypto unsustainable
There is a sudden meltdown across different asset classes around the world—barring equities, which have escaped the turmoil till now. Silver and gold, which saw a historic rise in prices in 2025, have come under pressure of late. The price escalation seen last year proved unsustainable as silver crashed from a peak of $125 an ounce in the last week of January to a low of $70 before closing around $77.
The virtual currency market is witnessing its share of volatility—a trend not unfamiliar to this asset class. Bitcoin is down 44 percent since its October peak of $125,000, while Ethereum has fallen 56 percent from its August peak of $4,800. The sharp rise and fall in bullion and cryptocurrencies are closely associated with uncertainty around US-led trade policies. At a granular level, there are specific reasons for the degree of decline in each asset class.
The lack of clarity on their regulatory status has weighed on cryptos even as institutional buying has picked up. The fall in gold and silver can be linked to the lower uncertainty around US trade policy than in 2025. Additionally, the US government’s nomination of Kevin Warsh for the Fed chair has had a cooling effect on bullion. Warsh is expected to be less aggressive with rate cuts, fuelling bearish sentiment in both gold and silver. This has led to large-scale outflows from gold and silver exchange-traded funds, further reinforcing the bearish trend.
The unexpected rise in silver prices in 2025 was attributed to a growing demand-supply gap. Industrial use of silver has been rising, with demand from the solar energy and electronics sectors soaring. But at these price levels, the supply gap is expected to shrink, with demand for investment and jewellery likely to fall in 2026. Irrespective of the steady industrial demand for silver and other metals such as copper, such steep price rises are unsustainable beyond.
Investors who missed the metals rally in 2025 should not expect a similar run in 2026. The ‘irrational’ expectation of an encore from these metals should therefore be viewed with caution. Silver and copper are not the new gold, nor are virtual currencies. These are volatile asset classes, and investors should not treat an exceptional run in any of these as the new normal.