Eroding trust in US dollar behind gold, silver and copper price rally, says TD Securities

[Redator]

Gold, silver and copper prices are surging as global investors lose faith in the US dollar, driving a rush into hard assets, according to TD Securities.

Gold burst through the $4,000 an ounce level this week, silver hit an all-time high, and copper surged toward $11,000 a tonne as investors fled risk and piled into hard assets. 

Behind the frenzy, says Daniel Ghali, Senior Commodity Strategist at TD Securities, is a breakdown in confidence in the greenback as a reliable store of value.

“This is what markets look like when the world’s reserve currency is at least partly losing its store-of-value function,” Ghali said in an interview this week.  “The denominator for all those asset prices — the dollar — is what’s actually declining in value.”

Ghali argues that the erosion of trust in the dollar is the unifying factor behind soaring commodity prices, tight credit spreads and strong equity markets. “Real assets are well-positioned to capture what the US dollar has lost,” he said.

Underowned becomes overbought 

With Goldman Sachs now forecasting gold at $4,900 by the end of 2026, the rally’s pace has left even seasoned analysts uneasy. 

Ghali says this move looks unlike previous waves, pointing out that China, traditionally the largest buyer,  is absent from the rally. “The Shanghai premium is trading deeply negative,” he said. “The West is what’s driving this move.”

TD Securities had earlier described gold as “overbought but underowned.” That has now changed. “For the first time this year, we can no longer argue that gold is underowned,” Ghali said. “There are clear signs of FOMO here.”

Silver’s endgame

The silver market’s breakneck rally may be reaching the end of its bull run. Ghali describes the current phase as the “end stage of the silver squeeze,” with London inventories running critically low. While tight supply is bullish, he warns of a reversal triggered by high prices pulling metal back into the market.

“There’s a tidal wave of metal making its way to London,” he said“That will persist for as long as silver stays at these levels.” He added that the rally is now driven less by fundamentals than by liquidity distortion. “Prices have become so dislocated that they can now correct themselves.”

Copper’s smelter pain and wartime economics

Copper’s climb towards $11,000 a tonne has sparked debate about how much of the move is driven by genuine supply disruption versus macro speculation. 

Ghali argues it’s both, warning that structural shifts are changing how this market functions.

“The West is inching toward a wartime economy,” he said. “Countries [in the West] are stockpiling, draining global inventory pools.”

But Ghali says this time the supply picture is different. 

“Chinese smelters have relied heavily on byproducts like sulfuric acid and precious metals for revenue,” he explained. 

“Now, as treatment charges fall and sulfuric acid prices drop, that model is breaking down.”

The result? For the first time in years, Chinese smelter curtailments are actually viable. 

Fed credibility and dollar’s decline

As investors brace for another Federal Reserve rate decision amid a lingering US  government shutdown, Ghali says the central bank’s credibility – not the rate itself – is what matters most.

“The Fed is walking a tightrope by cutting rates when some could argue it’s not necessary,” he said. 

“That can be detrimental to credibility — and that’s tied directly to the dollar’s loss of its store-of-value function.”

With markets betting on easing and the political backdrop worsening, Ghali’s warning is blunt: real assets may keep outperforming as long as trust in the dollar continues to fade.

Watch the full interview: