Gold and silver climbed to unprecedented record levels in a dramatic metals rally as escalating tensions between the US Justice Department and Federal Reserve sparked renewed concerns about central bank independence and institutional stability.

Record-Breaking Price Surge

The precious metals market witnessed extraordinary gains as multiple factors converged to drive safe-haven demand. Key price movements included:

Gold reached as high as $4,599.87 per ounce before trading at $4,593.46 as of 11:18 a.m. in London, while silver jumped as much as 6% to just above $84.60 per ounce.

Federal Reserve Under Pressure

The rally intensified after Fed Chair Jerome Powell revealed that the central bank faces potential criminal indictment from the Justice Department, describing "threats and ongoing pressure" from the administration to influence interest-rate decisions. This institutional pressure has become a significant driver for precious metals, with analysts noting that repeated attacks on the Fed were a major factor supporting gold and silver performance in the previous year.

"We see increased interference with the Fed as a key bullish wildcard for the precious metals in 2026," said Carsten Menke from Julius Baer Group Ltd. The smaller silver market, being more sensitive to interest rate and dollar movements, is "likely to react more strongly to such concerns."

Market Dynamics and Supply Constraints

Silver's exceptional performance reflects both investment demand and supply market dynamics:

• Historic Performance: Silver surged almost 150% in the previous year, partly due to a historic short squeeze
• Supply Tightness: London's dominant spot market continues experiencing constraints as tariff fears prevent supply flows from US warehouses
• Industrial Demand: Physical market tightness has reached unprecedented levels due to industrial consumption

BMI, a unit of Fitch Solutions Inc., projects the silver market deficit will continue throughout 2026, primarily driven by higher investment demand and industrial consumption.

Broader Economic Implications

The metals rally occurs amid multiple economic uncertainties. The Bloomberg Dollar Spot Index declined 0.3%, while US 10-year Treasury yields edged higher. Traders await results from the Section 232 investigation, expected this month, which may lead to US tariffs on silver, platinum, and palladium.

Charu Chanana, chief investment strategist at Saxo Markets in Singapore, noted that the possible Fed indictment "is a reminder of how many uncertainties markets are juggling — geopolitics, the growth/rates debate, and now a fresh headline-driven reminder of an institutional risk premium."

Global Market Factors

Additional factors supporting the precious metals surge include:

• Falling US interest rates and heightened geopolitical tensions
• Speculative activity in China, with traders piling into commodities including nickel, platinum, and silver
• Haven demand amid deadly protests in Iran and broader Middle East instability
• Money managers maintaining conviction in gold's long-term appeal

Bloomberg strategist Nour Al Ali noted that gold's rally "reflects a convergence of political, monetary and geopolitical risks that are reinforcing demand for haven assets," suggesting "a move toward $5,000 soon seems highly plausible given that backdrop."

Silver prices rallied sharply by ₹15,000 to hit a lifetime high of ₹2,65,000 per kg in the national capital on Monday, while gold advanced to a fresh record of ₹1,44,600 per 10 grams, mirroring strong gains in the global markets. The precious metals surge reflects growing investor appetite for safe-haven assets amid rising geopolitical tensions and monetary policy uncertainties.

Domestic Market Performance

According to the All India Sarafa Association, both precious metals recorded significant gains during Monday's trading session:

All prices are inclusive of taxes, with gold representing 99.9% purity. Silver's 6% surge marked a particularly strong performance, demonstrating the metal's higher volatility compared to gold.

International Market Dynamics

The domestic rally was supported by robust gains in international markets, where both metals achieved new record levels:

Gaurav Garg, Research Analyst at Lemonn Markets Desk, noted that "Gold has responded positively, and jumped to the $4,600 per ounce level, while silver has seen an even sharper surge to $84 per ounce, highlighting its higher beta in risk-sensitive environments."

Key Market Drivers

Several factors contributed to the precious metals rally, creating a confluence of supportive conditions:

Geopolitical Tensions: Escalating unrest in Iran and the continuing Russia-Ukraine conflict have heightened safe-haven demand. Trump has indicated consideration of military options against Iran following anti-government protests, asserting that Tehran had crossed a "red line."

Federal Reserve Uncertainty: Growing expectations of further US Federal Reserve rate cuts have supported bullion prices. Additionally, reports of a criminal investigation into Fed Chair Jerome Powell have raised concerns about the Federal Reserve's independence, weighing on the US dollar.

Market Volatility: Rising volatility in global equity markets has increased demand for precious metals as portfolio diversifiers.

Expert Analysis

Renisha Chainani, Head of Research at Augmont, explained that "Silver has surged to fresh record highs, breaching the $84 per ounce, driven by a mix of rising geopolitical tensions and growing expectations that the US Federal Reserve will be forced to cut interest rates further."

Saumil Gandhi, Senior Analyst for Commodities at HDFC Securities, highlighted how "the probe weighed on the US dollar, lending further support to bullion prices."

Market Outlook

The upcoming economic calendar presents several key events that could influence precious metals pricing. Chainani noted that "This week's economic calendar is packed, with the spotlight on the US inflation and consumer indicators. The December CPI report due on Tuesday will be important, as it may be the first inflation print unaffected by the government shutdown."

Garg emphasized that "the broader outlook for precious metals remains positive amid rising volatility in global equity markets, persistent geopolitical tensions, and sustained demand for safe-haven assets."