Precious metals are popular as a safe haven during volatile times. But investors also have the opportunity to exit or short equities and other risk assets, which is not evident so far this year. Instead, the precious metals rally appears to reflect concerns over a potential global surge in inflation.

We can infer the worldwide nature of this concern by looking at the currency markets. Since early 2025, even the world's strongest currency, the Mexican peso (MXN), has rallied only 18% versus the U.S. dollar (USD) (Figure 2). As such, even from the perspective of MXN, gold prices are up 51% since early 2025, while palladium, platinum and silver are up 72%, 131% and 162%, respectively. Precious metals' returns when valued in other currencies are even higher than from an MXN perspective (Figure 3).

Figure 2: USD has weakened somewhat versus most other currencies

Figure 3: Precious metals prices have soared irrespective of currency perspective

Source: CME Economic Research Calculations

The investors, whose decisions are pushing precious metals prices higher, appear to fear inflation for five reasons:

1. Growing geopolitical uncertainty.
2. Inflation remains above target in nearly every major country outside of China.
3. Central banks are cutting rates despite above-target inflation.
4. Concerns over central bank independence.
5. Large budget deficits in nearly every major economy including Brazil, China, France, Germany, Japan, Mexico, the U.K. and U.S.

What's curious is that bond investors don't appear to share these concerns. In the world's largest public debt market, U.S. Treasury yields have been falling at the short end. At the long end of the curve, yields have been stable even after the recent sell-off in Japanese government bonds (Figure 4). While it's understandable that short-term yields are falling, given the pressure on the Federal Reserve (Fed) to cut rates in the face of softening core inflation and weak employment growth, it is curious that long-term bond yields are not rising in line with the inflation fears expressed in the precious metals markets.

Figure 4: 30Y Treasury yields haven't risen much since early 2025

Break-even inflation spreads between standard U.S. Treasuries and Treasury Inflation-Protected Securities (TIPS) haven't moved much either. Currently, a Consumer Price Index (CPI) averaging 2.38% over the next 10 years would allow an investor in 10Y TIPS to break-even with an investor in standard 10Y U.S. Treasuries, assuming that both bonds were held to maturity - hardly a sign that bond investors are alarmed about inflation (Figure 5).

Figure 5: Treasuries vs. TIPS break-even hardly suggests alarm about inflation

In Europe, there has been some steepening of the 2Y-30Y year spreads, but nothing that would suggest that bond investors are concerned about the kind of rampant inflation that precious metals investors appear to be hedging against. Only in Japan are bond yields truly soaring, but that is happening in a market where the central bank didn't raise rates until 2024, more than two years behind its peers (please see appendix for charts on Australian, Canadian, European and Japanese bond curves).

In a nutshell, it's hard to see how both investors in precious metals and bonds can simultaneously be right in their pricing of future inflation risks. Either precious metals investors will be proven correct in that inflation will rise, bond investors will demand higher yields and central banks will have to raise rates OR bond investors will be proven right, inflation won't surge and precious metals prices will have to come back to Earth.

So, what does history teach us about such situations? In the past, when precious metals prices soared, which market - metals or bonds - turned out to be the better prognosticator of inflation? Let's take a look in reverse chronological order:

2019 to 2024: Precious Metals Make the Right Call on Inflation

Between early 2019 and mid-2020, gold and silver prices doubled with core inflation initially remaining low, only to begin surging between April 2021 and late 2022. It was almost as though precious metals correctly anticipated the post-pandemic wave of inflation, especially during the months from March to May 2020 when the Fed did $3 trillion of quantitative easing (QE) in three months in conjunction with what would eventually become $5.9 trillion of Federal spending on COVID-19 (Figure 6).

Figure 6: Precious metals seems to anticipate the 2021-22 wave of inflation

Meanwhile, Treasury yields followed inflation higher and peaked in late 2023, nearly a year after the peak in core CPI (Figure 7). In fairness, however, Treasury yields were depressed by the Fed's $4.9 trillion of QE which removed nearly one-fifth of the U.S. government's debt from the market.

Figure 7: Treasuries, influenced by QE, lagged inflation from 2019-2023

2002-2011: Precious Metals Rally but Bond Market Calls Inflation Correctly

Gold and silver began rallying in 2002, and by 2011 gold prices had increased six-fold while silver prices rose by over ten-fold. Even so, during this period and in the years that followed, core CPI barely budged, dipping towards zero during the global financial crisis and then stabilizing at just below 2% (Figure 8). It was almost as though gold and silver anticipated an inflation that never happened. One could also surmise that the boom in emerging market economies like China, India and the countries of Southeast Asia boosted global consumer demand for precious metals and that the rise in metals prices may have had little to do with actual anticipated inflation.

Figure 8: Gold and silver appeared to anticipate an inflation that never arrived

In any case, U.S. Treasury yields fell steadily during this period. This was partly a reflection of generally easing monetary policy and QE, especially after 2008, but it appears to be equally a response to falling inflation premiums as core-CPI appeared to be stuck at or below 2%, where it would remain until Q2 2021 (Figure 9).

Figure 9: From 2002-18, Treasuries accurately surmised that inflation was dormant

The 1977-1980 Inflation Episode: Metals Peak Before Inflation, Treasury Yields After

Core CPI rose from 6% to 14% between 1977 and 1980. During this time the relationship between gold, silver, U.S. Treasuries and inflation was a bit ambiguous. Gold and silver prices spent much of 1977 and 1978 rising slowly before soaring in 1979 and peaking in early 1980, about nine months before the inflation rate crested (Figure 10). Meanwhile, U.S. Treasury yields also rose from 1977 to 1979 but didn't peak until well into 1981 (Figure 11).

Figure 10: Gold and silver prices peaked before inflation in 1980

Figure 11: Treasury yields peaked substantially after inflation

The 1973-1976 Inflation Wave: Precious Metals Peak First, Treasury Yields Later

In August 1971 President Nixon de-linked the U.S. dollar from gold, allowing Americans to own and trade the yellow metal for the first time since 1933. Gold and silver prices rose slowly but steadily in 1972 and early 1973 appearing to anticipate the wave of inflation that would strike the world in October 1973 with the Arab Oil Embargo. Precious metals prices peaked in Q1 1974 with silver up 400% from its early 1972 levels and gold up around 300%. Both metals peaked about one year before core CPI crested in April 1975 (Figure 12).

Figure 12: Gold and silver rose ahead of inflation in 1973-74

Meanwhile, U.S. Treasury yields rose at a much slower pace, drifting from 6% in early 1972 to around 8% in 1974. As they would do later in the 1970s and again in the 2020s, Treasury yields crested long after inflation, peaking in October 1975 (Figure 13).

Figure 13: Treasury yields reacted more slowly to the 1973-74 inflation surge

Bottom Line

The current surge in precious metals prices does not guarantee a global wave of inflation - or even the possibility of one in the U.S. However, history suggests that investors should be on guard about the risk of inflation down the road as rising precious metals prices in 1972-74, 1977-80 and 2019-20 foretold higher inflation to come. That said, precious metals investors are far from infallible in their views of inflation as the bull market from 2002-11 and the lack of an inflationary surge for a decade afterwards demonstrates.

Meanwhile, the fact that Treasury yields are flat may be of some comfort. Treasury yields generally rose in 1972-73 and 1977-78 ahead of inflationary surges and they might have done so in 2020 and 2021 had it not been for the Fed's and other central bank's copious QE. That said, the fact that bond yields are rising at the long end of the curve in much of the rest of the world is less comforting (see appendix). At a minimum, we can say that the views of inflation expressed by U.S. Treasury investors and those implied by precious metals investors cannot both simultaneously prove correct.

Appendix Charts

Appendix Chart 1: Long term Gilt yields were rising slightly until November

Appendix Chart 2: Long-term OAT yields have been rising

Appendix Chart 3: Long-term German Bund/BUXL yields have been rising

Appendix Chart 4: Only Japanese yields are truly rocketing higher

Appendix Chart 5: Australian yields jumped slightly higher in 2025 and early '26

Appendix Chart 6: There has been a slight bear steepening of the Canadian curve

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.