Geopolitics and Central Banks Drive Gold Price Discrepancies, Silver Deficit Persists

Gold is currently trading around $4,377 per troy ounce in September 2026, but according to institutional models, it should already be above $6,000. The gap between the actual price and the forecasted price is not due to a market inefficiency waiting for correction, but rather a geopolitical discount that can be attributed to Middle Eastern hostilities.

Resolution or de-escalation of these hostilities could trigger a snapback in gold prices, as it would reverse the yield and dollar headwinds that are currently weighing on its price. This is because inflation fears would recede, Treasury yields would roll over, and risk sentiment would normalize, allowing the safe-haven and diversification case for gold to reassert itself.

Central bank demand has been a key driver of gold prices in recent years, with official-sector buying reaching a 55-year high of 1,136 tonnes in 2022. This shift reflects a broader recalibration of reserve diversification strategies among emerging-market and non-Western central banks, which have been actively reducing their exposure to U.S. Treasury holdings.

In contrast, silver's investment case is driven by a physical shortfall that has persisted for six consecutive years. Demand has exceeded supply every year since 2021, with the cumulative deficit reaching around 762 million ounces as of 2026. While this structural bid exists independently of investor sentiment or geopolitical resolution, it also comes with caveats such as technological efforts to reduce silver content per unit of output and substitution with other materials.