Gold and silver surged to record highs as concerns over Federal Reserve independence and escalating geopolitical tensions drove investors toward precious metals. The rally reflects a confluence of factors including potential central bank policy changes, regional instability, and shifting monetary policy expectations.

Record-Breaking Price Performance

Precious metals achieved significant milestones during the trading session, with both gold and silver reaching unprecedented levels.

Federal Reserve Independence Under Scrutiny

The precious metals rally intensified after the US Justice Department threatened the Federal Reserve with criminal indictment, raising concerns about central bank independence. Fed Chair Jerome Powell characterized the potential indictment as part of "the broader context of the administration's threats and ongoing pressure" to influence interest-rate decisions. These developments weakened the dollar and pushed US 10-year Treasury yields higher, creating favorable conditions for non-yielding precious metals.

Geopolitical Tensions Boost Haven Demand

Deadly protests in Iran increased the haven appeal of precious metals amid speculation about potential regime change in the Islamic Republic. Trump indicated he was considering various options regarding Iran while reiterating threats concerning Greenland and questioning NATO's value. These geopolitical uncertainties, combined with institutional risk premiums, have created sustained demand for safe-haven assets.

Silver Market Dynamics and Supply Constraints

Silver's exceptional performance builds on its historic 150% surge from the previous year, driven by a significant short squeeze in October. The London spot market continues experiencing tightness as tariff concerns prevent metal flows from packed US warehouses.

BMI, a Fitch Solutions unit, projects continued silver market deficits primarily due to elevated investment demand and industrial consumption.

Monetary Policy Expectations

Recent US jobs data maintained expectations for additional interest rate cuts, supporting precious metals prices. Markets have priced in at least two rate cuts following three consecutive reductions in the second half of the previous period. Softer labor market indicators have intensified expectations for earlier and more aggressive Fed policy pivots, which erode real yields and reduce the opportunity cost of holding non-yielding assets like gold.

Market Outlook and Legal Developments

The Supreme Court has scheduled Wednesday for its next opinion on Trump's tariffs, with a potential ruling against the levies representing a significant policy challenge. Additionally, traders await results from the Section 232 investigation that may impose US tariffs on silver, platinum, and palladium, with the report expected in January. The Bloomberg Dollar Spot Index declined 0.2% as precious metals strengthened across the board.

Gold prices witnessed extraordinary volatility on January 12, with the precious metal achieving a historic milestone before experiencing a sharp correction. The dramatic price movements occurred alongside significant gains in silver, highlighting increased investor interest in precious metals amid global market uncertainties.

Record-Breaking Price Action

Gold reached unprecedented levels during early trading hours, with spot gold briefly touching an all-time high of $4,610.5 per ounce on Comex at 1:05 AM GMT. However, the rally proved short-lived as prices declined rapidly to $4,580.60 by 2:28 AM GMT, still maintaining a solid 1.77% gain from the previous close.

Silver's Strong Performance

Silver demonstrated robust momentum alongside gold, with spot silver climbing 4.1% to reach $83.20 per ounce. The white metal also achieved its own milestone, hitting an all-time high of $83.96 earlier in the trading session before settling at current levels.

Domestic Market Performance

On the Multi Commodity Exchange (MCX), gold futures showed more subdued movement compared to international markets. The futures closed at ₹13,78,875 per 10 grams of 24-carat purity, registering a modest 0.04% increase. The Monday session opened at ₹14,08,700, representing a 1.48% gain from the previous close of ₹13,88,750.

Current Gold Pricing Structure

Gold prices vary significantly based on purity levels, with the following current rates:

City-wise Price Distribution

Gold rates across major Indian cities showed remarkable uniformity with only marginal differences attributed to local taxes, jeweller margins, and logistics costs:

Market Analysis and Outlook

According to Justin Khoo, Senior Market Analyst - APAC at VT Market, the record highs reflect "a decisive shift in global risk positioning rather than a short-term anomaly." He noted that the strength is particularly significant given the USD Index holding close to 99, indicating robust safe-haven demand.

Key factors supporting precious metals include:

• Elevated geopolitical uncertainty
• Expanding global defense expenditure
• Persistent inflation pressures with US CPI projected at 2.7% year-on-year
• Tariff-led fiscal expansion estimated at $250-270 billion reinforcing hedging demand

The current market environment suggests continued structural support for precious metals, even with potential near-term consolidation phases.