Precious metals kicked off the week with remarkable strength as both gold and silver scaled fresh historic peaks, driven by robust safe-haven demand amid escalating geopolitical tensions and market uncertainty surrounding Federal Reserve leadership.

Gold Crosses ₹1.41 Lakh Milestone

February gold futures on MCX demonstrated exceptional momentum, opening higher at ₹1,39,600 per 10 grams compared to the previous close of ₹1,38,819. The metal continued its upward trajectory to establish a new record high of ₹1,42,340, representing a substantial gain of ₹3,521. This milestone marked the first time gold crossed the ₹1.41 lakh threshold on the domestic exchange.

International spot gold prices mirrored the domestic strength, reaching a fresh peak of $4,611.00 per ounce, marking a 2.20% increase from the previous close of $4,509.00.

Silver Rallies to ₹2.68 Lakh Territory

March delivery silver futures on MCX exhibited even more pronounced gains, surging ₹15,532 per kilogram to establish a new record high of ₹2,68,257. This performance built upon the previous week's 7.00% rally and contributed to an impressive 14.00% surge in the first nine trading sessions of 2026.

Globally, spot silver prices strengthened by 7.00% to reach $85.49 per ounce, extending January's remarkable 19.15% surge following a substantial 148.00% gain in 2025.

Market Outlook and Price Targets

Motilal Oswal, in its latest research report, maintains an optimistic outlook for both precious metals in 2026. The brokerage has established ambitious price targets while setting clear risk parameters for investors.

Safe-Haven Demand Drivers

Multiple factors contributed to the precious metals rally, creating a confluence of supportive conditions. Geopolitical tensions surrounding China-Japan trade relations and the US capture of Venezuela's leader heightened market uncertainty. Additionally, reports of a criminal investigation into Federal Reserve Chair Jerome Powell added to investor concerns about monetary policy stability.

Middle East tensions intensified as anti-government protests erupted in Tehran amid an internet shutdown and government crackdown. These developments reinforced the appeal of precious metals as safe-haven assets during periods of global uncertainty.

Dollar Weakness Supports Rally

The US dollar experienced its most significant decline in three weeks following news of the Federal Reserve investigation. The dollar index fell 0.50% to 98.67, ending a five-day winning streak and making dollar-priced commodities more attractive to international buyers.

Traders are closely monitoring the upcoming US consumer price index data for December, which represents one of the final key economic indicators before the Federal Reserve's monetary policy meeting scheduled for the end of January. The mixed signals from recent US jobs data have provided limited clarity regarding the future direction of interest rate policy.

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."