Gold and Silver Rally Hints Towards Geopolitical Insecurity 

The Economic Survey 2025-26 describes the steep rise in prices of precious metals such as gold and silver as a reflection of growing global financial and geopolitical insecurity, while warning that international trade is shaped by security concerns rather than multilateral cooperation.

The Survey observes that gold prices surged dramatically in 2025 due to a weakened US dollar, forecasts of persistently negative real interest rates, and heightened geopolitical and financial tail risks.

It views the surge in precious metals, particularly silver, as a market reaction to rising global fragility and investor demand for safe-haven assets during times of uncertainty.

While emphasising gold’s importance as a barometer of global risk mood, the Survey specifically excludes gold and silver from core inflation measurements, implying that price changes in these metals are influenced by international financial circumstances rather than domestic demand-supply dynamics.

It says that modest core inflation, excluding gold and silver, speaks to stronger supply-side fundamentals in the domestic economy.

The Survey connects the rise in precious metal prices to deeper structural trends in the global economy. It claims that financial markets are pricing in greater uncertainty as geopolitical competition intensifies, trade frictions deepen, and concerns grow over leveraged investments, particularly in technology and artificial intelligence-related infrastructure.

Regarding trade, the Survey notes that global trade policy is no longer largely guided by efficiency or multilateral standards. Instead, it claims that commerce is driven by political and security concerns, with increased use of tariffs, sanctions, and countermeasures. This transition, it argues, has made global trade more fragmented, less predictable, and more vulnerable to episodic shocks.

The Survey warns that such an environment poses risks to capital flows, currency rates, and external balances, especially for economies with chronic trade deficits in goods. It observes that India’s service exports and remittances give some relief. Still, they are not a substitute for developing robust manufacturing-based export ecosystems that support long-term trade and currency stability.

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