The world feels fragile. With conflicts raging in Europe and the Middle East, and tensions simmering across global chokepoints, a familiar unease has settled over markets. It is in these moments of chaos that investors often turn to two ancient metals: gold and silver. They offer no dividends and promise no future cash flows, yet they possess a deep-seated psychological allure as the ultimate stores of value when trust in governments, currencies, and banks evaporates.
But is this reputation justified? To understand where gold and silver might be heading in 2025, we have to look back at the blood-soaked history of the 20th and 21st centuries. The data reveals a compelling, if sometimes volatile, relationship between war and precious metals.
The Golden Spike
Gold’s reaction to war is rarely a slow burn; it is often a violent spike. Consider the 1970s, a decade that feels eerily similar to our own. It was a period defined by oil shocks, geopolitical upheaval, and runaway inflation.
When the Yom Kippur War erupted in 1973, Arab oil producers slapped an embargo on the West. The price of oil quadrupled, and the US dollar, already reeling from the end of the Bretton Woods system, weakened dramatically. Investors scrambled for safety. In less than a year, the price of gold surged by 115% .
This wasn't a one-off event. As the Iranian Revolution unfolded in 1979, taking the Shah off his throne and replacing him with a theocracy, global oil supplies were again disrupted. Panic buying sent gold up 160% over two years. By the time the Soviet Union rolled into Afghanistan later that year, gold had smashed through its previous records, hitting $850 an ounce—a price that wouldn't be seriously challenged for nearly three decades.
Fast forward to the 21st century. The 9/11 attacks weren't just a human tragedy; they were an economic earthquake. The ensuing War in Afghanistan and the 2003 invasion of Iraq unleashed a tide of government spending and uncertainty. Gold, which had been languishing around $250 an ounce in 2001, began a long, steady climb. It broke the $400 barrier during the Iraq invasion and never looked back.
More recently, the Russia-Ukraine War in 2022 provided a textbook example of the "flight to safety." As tanks rolled into Kyiv, gold surged from $1,800 to over $2,000 per ounce . The fear wasn't just about the conflict zone; it was about the disruption to energy and food supply chains that would ricochet around the world.
The Volatile Cousin: Silver's Surprising Bite
If gold is the stoic, reliable guardian of wealth, silver is its volatile, high-octane cousin. Because silver is both a "precious" and an "industrial" metal—vital for everything from electronics to solar panels—its reaction to war is often more dramatic.
History shows that silver can actually outperform gold during geopolitical crises. A study of twelve major upheavals since 1979 reveals that silver prices jumped an average of 15% , beating gold's 12% average gain.
The long-view data is even more staggering. During the long slog of the Vietnam War (1961-1975), silver prices didn't just rise; they exploded by 378% . More recently, the two-decade-long Afghanistan and Iraq Wars (2001-2021) coincided with a 440% increase in silver. In the first month of the Ukraine war alone, silver rose 12% , leaving traditional stock indices like the Nifty50 in the dust.
Why the outperformance? It comes down to affordability and utility. Silver is cheaper per ounce than gold, attracting more speculative retail buying during times of panic. Furthermore, while war destroys, it also creates the expectation of future rebuilding—an industrial demand that silver is uniquely positioned to satisfy.
The Great Interrupter: Central Banks
However, the history books also contain a crucial warning: war is not the only force that moves these metals. In the 1980s, despite the ongoing Cold War and numerous regional conflicts, gold entered a two-decade bear market, plunging 70% from its 1980 peak.
The culprit wasn't a lack of war; it was the central banks. Paul Volcker, the Chairman of the US Federal Reserve, broke the back of inflation with aggressive interest rate hikes. When investors can earn a high real yield from bonds or savings accounts, the appeal of holding a non-yielding asset like gold diminishes, regardless of the geopolitical backdrop.
This is the critical lens through which we must view today's conflicts. If central banks pivot to cutting interest rates in 2025—as many expect—the environment becomes a "sweet spot" for gold and silver. But if inflation proves sticky and rates remain high, the upside may be capped, even with wars raging.
The Verdict
As the world grapples with the reality of ongoing wars, the historical compass points decisively toward higher gold and silver prices. The human instinct to seek refuge in tangible assets during times of existential fear is deeply embedded in our psychology and our markets.
Yet, the final chapter of this story will not be written by generals alone. It will be written by central bankers in Washington and Frankfurt. For now, the metals glitter with the ominous light of global uncertainty.