Gold and silver prices rise as conflict disrupts supply chains

Commodity analyst Vivek Aggarwal dissects the elevated prices of gold and silver with Alex Blair as demand skyrocketed on Valentine’s Day.


As Valentine’s Day prompted a spike in jewellery sales in the first half of February, analysts have pointed to geopolitical risks and supply chain disruption as key factors driving an increase in gold and silver prices.

In a major boost for retailers, North American consumers alone are expected to have spent an estimated $6.4bn on jewellery, according to research from the National Retail Federation.

This comes at an increased cost for consumers, according to Vivek Aggarwal, senior commodities analyst at research firm The Smart Cube.

“Gold prices hit a record high of over $2,100 per ounce on an intra-day basis in December 2023,” Aggarwal told our sister publication Mining Technology. “A rise in safe-haven demand for gold amid the ongoing Israel–Hamas war and Red Sea shipping crisis are set to see prices remain elevated.”

Supply chains of key commodities through the Red Sea have been severely disrupted by the Houthis, a Yemen-based militia, attacking vessels passing through a region which oversees roughly 11% of global trade.

“There has been a decline in the US dollar index,” Aggarwal says. “The US Federal Reserve ended its monetary policy cycle in December, which supported the [gold] price uptrend as a weakness in the US dollar makes dollar-denominated metals more affordable for buyers using other currencies.”

Prices have declined by 6.7% since the peak of December 2023, and are expected to continue along a short-term dip amid bearish market trends. 

Silver: a safe haven?

Aggarwal attributes gold’s short-term dip to “hawkish comments by US Fed members amid uncertainty related interest rate cut in Q1 2024” but believes “ongoing geopolitical risks in the Middle East will push up demand for the safe-haven assets, which may limit the price downtrend”.

The same is true with silver. Prices also rose in December 2023 due to its position as a safe-haven asset but have dropped in 2024.

“The aforementioned rising US dollar index and reduced expectations of an interest rate cut, in addition to a slowdown in global manufacturing activities – which reduces silver industrial demand – may push prices downward,” according to Aggarwal.

Estimations by the World Bank, meanwhile, forecast an overall decline in energy and agriculture commodity prices, but a slight rise in minerals and metals costs over the next two years.

The World Bank cites trade restrictions from the El Niño weather phenomenon and the impact of the Middle East conflict as main impacting factors.

“Meanwhile, there is no impact of the Red Sea crisis on base metals’ prices,” Aggarwal concludes. “Currently, the metal markets are well supplied, and prices are kept stable by a combination of subdued global demand and bearish macroeconomic sentiments due to uncertainty related to interest rate cuts in Q1 2024 by major central banks and a weak construction sector outlook in China.”