From the perspective of Sprott’s experts, gold remains a central strategic building block for investors, even if the precious metal suffers in the short term from the rise in US Treasury yields. The firm argues that the recent pressure on the gold price results primarily from higher opportunity costs. At the same time, the underlying causes of this rise in yields are precisely those factors that could make gold more interesting again for private and institutional investors in the medium term. While the outlook for gold appears burdened in the short term but structurally intact, the situation for silver is significantly more complicated.
At the heart of this assessment is the observation that, in Sprott’s view, the long-term drivers for gold have not changed since 2022. Although the metal has corrected significantly since the end of January, particularly in the first weeks of the Iran war, the firm does not see this as a break in the overarching trend. Rather, the decisive factor is that while rising yields initially direct capital into the US dollar and supposedly liquid alternatives, they do not alleviate the structural problems of public finances. According to Sprott, this is precisely where gold’s medium-term attractiveness begins.
Gold Under Pressure in the Short Term, but Strategically in Demand
According to Sprott, the immediate headwind for gold comes from increased yields on the US bond market. Higher Treasury yields increase the opportunity costs of holding a non-interest-bearing asset like gold. For investors acting tactically and in the short term, this can be enough to step back from the gold market for the time being.
Sprott points out, however, that even US Treasuries are not free of price risks in this environment. Anyone holding a ten-year US bond in January would today face a loss in value of around 3% to 4%, as yields have risen by 30 to 40 basis points since then. For gold, this is an important correlation: while rising yields weigh on the price in the short term, they simultaneously reveal that even bonds considered stable can lose value.
This is exactly where Sprott derives its medium-term view on gold. As the financial situation of states becomes more difficult and additional money creation appears more likely in many scenarios, gold becomes relevant again as a hedge against currency and debt risks. This means: the short-term rise in yields works against gold, but the reasons for this rise in yields will, in the firm’s view, later speak in favor of gold again.
Sprott Sees Institutional Demand for Gold Not Yet Exhausted
A second important point concerns the role of institutional investors. In Sprott’s view, the next major wave of demand for gold from this camp is still pending. The movement initially began with central banks, then shifted more strongly to private investors and, in some cases, ETF investors from mid-2024. However, broad institutional participation has not yet fully materialized.
Sprott explains why many institutions have only limited exposure despite gold’s strong performance with two factors. Firstly, many firms lack internal expertise for commodities in general and for gold as a distinct asset class in particular. Part of this knowledge was lost after the correction in the commodity sector around 2015. Secondly, equity markets performed so well for a long time that many institutional investors saw no reason to expand their investment universe further.
For gold, this means: the reluctance of many large investors is not interpreted as a vote against the precious metal, but rather as a result of institutional inertia. As long as stocks like the S&P 500 are performing well, many firms will not refocus their attention. Only when these traditional asset classes lose their appeal could gold come back into sharper focus for broader institutional circles.
Sprott also points out that alternative themes like Bitcoin have apparently tied up more internal resources in some firms than gold or commodities. However, this does not change the fact that institutional investors will have to deal with gold again in the long term when wealth protection and diversification regain importance.
Silver Remains in Deficit but Reacts More Sensitively to Growth Concerns
While gold remains strategically attractive in Sprott’s view, the firm sees a more difficult environment for silver in the short term. Fundamentally, the market picture remains tight: another deficit is expected for this year—meaning demand exceeds supply—for the sixth consecutive year. Nevertheless, silver is more closely linked to industrial demand than gold and is therefore more vulnerable to an economic downturn.
The Iran conflict in particular adds further weight to this picture. When economic uncertainty rises and growth expectations fall, industrial demand for silver can weaken. Added to this are higher yields, which initially make precious metals as a whole less attractive. Although silver also possesses a monetary and diversifying component, Sprott concludes that these positive characteristics are overshadowed in the short term by the pressures of weaker industrial demand and increased interest rates.
For silver, this means a less favorable starting position than for gold. Even if the supply side remains tight, the market must simultaneously deal with a cloudier demand outlook. Therefore, Sprott also expects that gold would lead a possible recovery in precious metals—and silver could only follow afterwards.
Gold Remains the Pace-Setter, Silver for Now the Laggard
Bottom line, Sprott paints a two-part picture: gold remains strategically interesting despite short-term yield pressure because the fiscal and monetary burdens in the system are growing rather than shrinking. While silver also benefits from a tight fundamental environment, it must fight harder against economic uncertainty and declining industrial momentum.
From Sprott’s perspective, this results in a clear sequence for investors. Gold remains the likely pace-setter within the precious metals sector. Only when gold turns clearly upward again is silver likely to find its way out of its more difficult short-term situation. Until then, the environment for both metals remains different: gold as a strategic hedging asset with an intact long-term outlook, silver as a precious metal with a tighter market but greater dependence on global growth.
