Gold and silver achieved record highs on Tuesday as markets responded to weaker-than-expected US inflation data and continued uncertainty surrounding Federal Reserve independence. The precious metals extended Monday's rally amid renewed political pressure on the central bank.

Record Price Levels Reached

Both precious metals hit significant milestones during Tuesday's trading session:

Treasury yields declined following the latest US inflation data, which showed signs that price pressures are gradually abating. This development particularly benefits precious metals, which do not pay interest, making them more attractive when yields fall.

Federal Reserve Independence Concerns

The Trump administration has escalated attacks on the Federal Reserve, with Chairman Jerome Powell stating that potential indictment threats represent a continuation of attempts to pressure the central bank. These developments have revived what markets term the "sell America" trade, causing the dollar to drop on Monday while Treasuries sold off across the yield curve.

David Wilson, director of commodities strategy at BNP Paribas SA, noted that with Powell's tenure as Fed Chair ending in May, uncertainty over Fed independence and US interest rate trajectory will remain a key gold market driver for much of 2026. The attacks on Fed independence helped propel gold to successive record highs last year, alongside heightened trade and geopolitical risks and central bank buying.

Silver's Momentum Continues

Silver has emerged from a record-setting year, with significant gains occurring in the second half when a historic short squeeze gripped global markets. A speculative frenzy in December propelled silver to successive highs, driven by:

• Speculative flows and momentum-oriented trading
• Concerns over US tariffs
• Renewed uncertainty about Fed independence
• Retail investor interest in portfolio diversification

Ole Hansen, a strategist at Saxo Bank A/S, emphasized that much of the activity stems from speculative flows, particularly momentum-oriented traders who chase strength upward but quickly reduce exposure when prices decline.

Market Outlook and Structural Changes

Citigroup Inc. has issued bullish forecasts for both metals:

Citi analysts expect the bull market to remain intact in the near term, though they anticipate eventually moderating geopolitical risks may weigh on hedging demand later in the year, particularly for gold.

CME Group announced significant operational changes effective Tuesday's close, shifting margin calculations for gold, silver, platinum, and palladium futures from dollar amounts to percentage-based notional values following the price surge and volatile trading. The exchange will also launch a new 100oz silver contract on Wednesday to facilitate greater retail investor participation.

Jin Hennig, global head of metals at CME Group, stated that silver increasingly appeals to retail traders seeking diversification across metals amid geopolitical uncertainty and the energy transition. Other precious metals also participated in Tuesday's rally, with platinum and palladium posting gains alongside the record-setting performance in gold and silver.

Multinational investment bank Citigroup has significantly upgraded its near-term price forecasts for precious metals, projecting substantial gains driven by multiple bullish factors. The bank expects gold to reach $5,000 per ounce and silver to surge to $100 per ounce within the next three months, citing strong investment momentum and persistent market drivers.

Upgraded Price Targets and Market Outlook

Citigroup's revised forecasts reflect considerable upside potential from current market levels. The gold price target represents a 9% increase from the current level of $4,589 per ounce, while the silver forecast indicates a potential 17% jump by April.

"We upgrade our near-term price forecasts across the precious metals complex as investment momentum remains strong and the multitude of bullish drivers are now likely to remain intact during 1Q26," a Citi note stated.

Key Market Drivers

Citigroup identified several factors supporting the bullish outlook for precious metals:

• Heightened geopolitical risks creating increased demand for safe-haven assets
• Ongoing physical market shortages, particularly affecting silver supplies
• Renewed uncertainty regarding US Federal Reserve independence
• Strong investment momentum across the precious metals complex

Recent Performance Across Metals Complex

The bank's analysis highlighted impressive recent performance across various metals, validating its longstanding bullish stance. Citi noted that its call for silver to outperform and for the precious metals bull market to broaden into industrial metals has delivered substantial returns.

Supply Chain and Trade Considerations

Citigroup emphasized persistent physical market tightness, particularly affecting silver and platinum group metals. The analysts highlighted potential risks from upcoming Critical Minerals Section 232 tariff decisions in the US, which could create "large binary risks on trade flows and prices."

In a high-tariff scenario, the bank warned that shortages could worsen temporarily as metal shipments rush into the US, potentially triggering extreme price spikes across affected commodities.

Longer-Term Market Expectations

Beyond the March quarter, Citigroup's base case scenario assumes some moderation in precious metals demand. The bank expects easing geopolitical tensions to reduce hedging demand later in the year, with gold being most exposed to this potential shift.

The analysts continue to favor industrial metals, particularly aluminium and copper, for sustained performance. They anticipate a neutral to slightly stronger US dollar environment with maintained Federal Reserve political independence, which could support continued outperformance of industrial metals over precious metals in a growth-oriented market scenario.