Gold, silver and the commodity price cycle – an ASX investor’s guide to what comes next

On 29 January 2026, gold traded as high as US$5,598.75/oz and silver hit US$121.65/oz – the highest prices either metal had ever fetched, in a run that had taken them up 29% and 60% respectively in the prior 30 days alone.

Then began a correction that has challenged even the most ardent precious metals bull’s nerves, as gold bottomed at US$3,942.71/oz on 30 June, down 29.6%, and silver at US$54.78/oz on 17 July, less than half its peak value. Both have since clawed back some ground (gold is at US$4,425/oz and silver at US$66.66/oz) – but both remain well shy of their highs.

If you read my earlier explainer on the commodity price cycle, you’ll recognise the shape of these charts. A gradual rise that accelerates to a near-exponential zenith, followed by a precipitous crash. The prices of many commodities run full circle and give back the entire advance, but this isn’t the case for gold and silver – at least not yet!

While these charts resemble a typical commodity price cycle’s shape, the reasons for their gyrations are completely different from those experienced by lithium or uranium. For most commodities – metals, energy, or agricultural – the bust arrives because the boom summons new supply into existence, and that supply eventually drowns the higher prices that paid for it. It’s ultimately a story about capital expenditure, and it takes years to play out.

Nothing like that happened here. No major new gold or silver mine came online between January and July to tip the balance in either market. Warehouses were not stacked to the rafters with unwanted metal. Indeed, the production side of these two markets barely moved at all – and yet their prices plummeted. That gap between the typical commodity price cycle and what drives gold and silver is worth understanding.

So, in this article I explain why precious metals boom and bust for reasons other than shifts in consumption and production, how to read the gold and silver price cycles, and whether the current one is coming to an end – or only just beginning.

Typical commodity price cycles

The standard commodity price cycle has four phases, and every one of them is a supply-side story.

Something disturbs a settled market – a technology, a policy, a change in consumer behaviour – and demand pulls away from supply. Prices rise. The price rise makes production lucrative, so producers extract everything they can from existing operations and raise capital to build more. Banks lend. Investors buy newly issued shares. Marginal projects that made no sense at the old price suddenly get the green light.

Then the new supply arrives. It arrives late, because mines take years to build, and it often arrives all at once, because everybody responded to the same price signal at the same time. Consumers of the commodity who spent the boom stockpiling stop buying. Prices fall, then fall harder. Producers go into care and maintenance, new projects get shelved, then axed, and the underinvestment that follows plants the seed of the next cycle.

Sound familiar? Probably because lithium has just closed the loop (for the second time in roughly a decade!). Carbonate prices collapsed between 2022 and 2024, bottomed around CNY60,000 per tonne in June 2025, and are back to around CNY150,000 per tonne today. The bust cured the bust, exactly as the model says it should.

The reason the typical commodity price cycle works is because supply answers price. Take that away, and the model looks very different.

Why precious metals don’t follow the usual commodity cycle script

Gold and silver still move through price cycles, but theirs tend to be very different from other commodities where supply dominates the script. Consider that for these precious metals:

Almost every ounce ever mined is still above ground: gold is not consumed. It’s worn, vaulted, and passed on. The overwhelming majority of all the gold ever produced still exists in some retrievable form, which means annual mine output is a tiny fraction of the total stock in existence. New production is not the marginal supply in this market – how much is changing hands is what matters most.

That supply responds in weeks, not years: this is the part that breaks the usual four-phase commodity price cycle model. Gold’s supply is price-elastic – it just doesn’t need a hundred new mines to be built to respond. A higher price pulls scrap out of drawers and bars out of vaults almost immediately. So, there’s no multi-year capital expenditure boom to overshoot, and no glut arriving years later.

The buyers aren’t really consumers: industrial and jewellery demand can’t be completely discounted, but their impact is marginal – they don’t set the price. Gold is bought overwhelmingly as a financial asset – by investors, funds, and central banks – and financial demand can reverse in a single session in a way that a factory’s order book cannot. When the main buyer is a portfolio manager rather than a manufacturer, the demand side becomes the volatile one.

Silver is the exception that proves the rule: a large share of silver is consumed industrially – in solar panels, electronics, and vehicles – and much of it is dispersed in quantities too small to recover economically. So, silver’s above-ground stock is far smaller relative to demand than gold’s. On top of that, most silver is produced as a by-product of copper, lead, zinc, and gold mining, which means a higher silver price does not automatically or immediately summon more silver. Arguably, the copper price is more important for silver supply than the silver price.

And this last point is why silver, not gold, is the one most likely to experience a more typical commodity supply squeeze.

Gold trades on everything except its own production

If production doesn’t set gold’s price, what does?

Investors buy gold when they’re worried about something they can’t diversify away: currency debasement, a banking system under strain, a government that looks unable to fund itself, a war. It pays no income and does nothing useful in a portfolio except sit there, looking shiny.

Which is precisely the point. A gold bar in a vault, or under your mattress, relies on no counterparty, no earnings, no mine producing more of it, and no supposedly unbreakable cryptographic algorithm.

But that doesn’t mean gold doesn’t have weaknesses. Its kryptonite comes from its very strength: it doesn’t actually do anything. It doesn’t pay a coupon like a government bond, a dividend like a stock, or interest like a bank account.

Set volatile stocks aside and look only at the risk-free assets that gold competes with. Remember, gold’s attraction beyond being shiny is that it’s virtually indestructible and holds its value. Its Achilles heel is higher interest rates – or more precisely, higher inflation-adjusted interest rates (i.e., after inflation is stripped out).

Assuming you own more gold than you can fit under your mattress, you’ll usually pay someone to store it in a secure location (and sit on it with a shotgun!), and you’ll probably want to insure it. This is expensive, and the costs add up each day. We say that there’s an opportunity cost to owning gold, and this cost grows with the yields on offer from risk-free assets like cash and high quality government bonds.

This is the bit investors need to remember: Gold rises when real yields fall, and it falls when they rise. It’s a relationship that’s been intact for most of modern finance – and it still is. For most of this century, week to week, gold has moved against real yields reliably, with a correlation of −0.29 (this just means that when real yields rise, the gold price has tended to decline).

But since 2022, something strange has happened. Gold has set record after record – in both nominal and inflation-adjusted terms – while real yields have stayed stubbornly high. On the old rule, that shouldn’t be possible.

The chart above plots every trading day since 2003, one dot per day. Along the bottom is the US 10-year real yield: cheap money on the left, expensive money on the right. Up the side is the gold price, converted into today’s dollars so the decades are comparable. Look at the shape before anything else. Both clouds of dots drift downwards as you move right – higher real yields equal cheaper gold – exactly as the theory suggests.

The grey stripe marks the band of real yields that the pre-2022 and post-2022 eras have in common. Since 2022, gold has still moved in the opposite direction to real yields with a correlation of −0.25. That hasn’t changed much – but note the altitude it has run at. In today’s money, when the real yield sat between 1.5% and 2.5%, gold averaged around US$970 before 2022 and around US$3,140 after it. Same yield, more than three times the price. Why?

The explanation appears to lie with central banks. The World Gold Council (WGC) refers to them as the “official sector”. WGC data shows that official-sector buying stepped up sharply from 2022, as emerging market central banks shifted reserves out of US dollar assets and into gold. Indeed, official-sector purchases hit a record in the second quarter of this year. Consider that these buyers aren’t like your regular investment bank. They’re less concerned about opportunity cost, and more concerned about their currency and the robustness of their reserves. The official sector doesn’t care what a two-year US Treasury note pays.

None of which means inflation-adjusted rates have stopped mattering week to week. The spike in global risk-free bond yields is the most likely explanation for the late-August sell-off, as the market fretted about US Treasury supply and the increasing likelihood of Fed rate hikes.

Silver runs the same cycle with the volume turned up

Silver has now had three great runs in recent history, and they rhyme.

January 1980, at the end of the Hunt brothers’ attempt to corner the market, silver reached US$48.00*. In April 2011, in the aftermath of the financial crisis, it reached US$49.83 and failed to clear the old high by 0.3%. Then on 9 October 2025 the ceiling finally broke, and silver ran to US$121.65 by January this year.

What makes silver the cycle on steroids is what it does at the end. In the final 30 days into the January peak, silver rose 60% versus gold’s 29%. Over the preceding 24 months, silver was up 425% against gold’s 175%. Same story, same buyers, same fears – roughly double the amplitude in the final run-up and more than double over the broader bull market.

Then came the reckoning. Silver’s 1980 bust ran 92.8% from peak to trough and took 11 years to complete. Its 2011 bust ran 76.6% and took nearly nine. Gold’s equivalents were shallower on both occasions – 71.2% over 19.6 years, then 45.5% over 4.2 years.

Which brings me to the question I keep being asked. Silver waited 46 years to make a new high – is the next one 46 years away? As you know, I don’t do predictions (because the future is unknown rendering predictions futile!). But, in my experience, when a market breaks as big and as fast as silver did this year, it’s usually the end of the current cycle. I actually called January’s break a “species-ending event” at the time (think dinosaurs versus meteor sort of stuff). And add to this the fact that history suggests it’s a long time between drinks for silver bulls – I’m not optimistic about silver’s near-term prospects.

So, are we in the up-cycle or the down-cycle?

I base all of my views purely on the charts, the technicals: candles, price action, trends, and volume. Those suggest to me that there’s a high probability the current cycle is over – at least for a good while. As for gold and silver versus historical price-time trends, consider:

The case that the down-cycle has barely started: measured at the same point after the peak – five and a half months – silver is down 54.0% and gold 28.2%. Silver’s two previous busts ran to 92.8% and 76.6%, and both took the better part of a decade. Gold’s decline at this stage compares with 21.8% following the 1980 top and just 7.5% following 2011, already deeper than either predecessor. If history is to repeat, then both metals would have a long way and a long time to fall.

The case that the up-cycle isn’t finished: adjust for inflation and January’s record looks a lot less like a top. In July 2026 dollars, silver’s 1980 peak is worth US$206.02. The all-time high set this January was US$124.89 in the same money – roughly 39% below the level silver reached 46 years ago. Gold, by contrast, made a genuine inflation-adjusted record in January, 53% above its 1980 peak in real terms. Can we then assume that one of these metals has completed its journey (gold), while the other isn’t even close (silver)?

The relationship between the two says something as well: the gold-to-silver ratio – how many ounces of silver one ounce of gold buys – stood at 46.5 at the January peak. At the 2011 top it was 32.1, and at the 1980 top just 17.2 (lower means less silver is required to buy the equivalent amount of gold). Silver was nowhere near as stretched against gold this time compared to previous blow-offs, which is not what you would expect at the end of a completed silver mania. It sits at 67.1 today, a touch above its median since 1970 of 63.0 – so the jury is out on this one.

Conclusion: the commodity price cycle has versions, but investor discipline doesn’t

Fifteen years ago, in April 2011, silver reached what was then its highest price in three decades. Anyone who bought that day has since watched the metal set an all-time record – and is still, today, about 10% behind inflation on the trade. That is what these markets do to an investor who holds too long.

The commodity price cycle is real, but it has versions: one driven by mines that take years to build, another by investor sentiment that can turn in an afternoon. Lithium, uranium, copper – these are commodity price cycles dominated by supply. Gold’s and silver’s are dominated by demand.

What doesn’t change across those versions is the strategy required by investors. There’s always a story compelling enough to drive the market into a frenzy on the way up. I call these “plausible narratives”. I’m happy to back a plausible narrative while a trend is running, but the turns in commodities markets can take your breath away – and your life savings with it. That’s when the discipline to exit matters most, because a plausible narrative can too easily become a capital killer.

This article draws on original Market Index quantitative research. Daily gold and silver price data sourced from TradingView (September 2026), lithium carbonate price data from SMM (September 2026), consumer price index data from the US Bureau of Labor Statistics (August 2026), 10-year TIPS real yield data from Federal Reserve Economic Data (September 2026), and official-sector gold demand data from the World Gold Council (2026). *A note on that 1980 figure: the widely quoted number is US$50.35, from a Comex intraday print. The dataset used throughout this article, however, puts the high at US$48.00. I’ve stuck with the latter for internal consistency so that every comparison here is drawn from the same series.