Gold and silver prices soared to record highs amid escalating geopolitical tensions and growing bets on further Federal Reserve rate cuts, extending their strongest annual performance in over four decades.
Gold prices surged 2.4%, surpassing the previous record of $4,381 per ounce set in October, while silver jumped 3.4%, approaching the $70-per-ounce threshold. The rally reinforces both metals' trajectory toward their most robust annual gains since 1979.
The latest uptick was driven by traders pricing in two Fed rate cuts in 2026 and former U.S. President Donald Trump's advocacy for looser monetary policy. Lower interest rates typically benefit non-yielding precious metals. Meanwhile, heightened geopolitical risks—including U.S. sanctions tightening on Venezuela’s oil sector and Ukraine’s first strike on a Russian "shadow fleet" tanker in the Mediterranean—boosted safe-haven demand.
Dilin Wu, a strategist at Pepperstone Group Ltd, noted, "Today’s rally stems from early positioning around Fed rate-cut expectations, amplified by thin year-end liquidity." Weak November job growth and softer U.S. inflation data have reinforced easing expectations.
Gold has skyrocketed 67% this year, fueled by central bank purchases and inflows into gold-backed ETFs. Trump’s aggressive trade policies and threats to Fed independence earlier this year further accelerated gains. Investors also pivoted to gold via "currency debasement trades," fleeing sovereign bonds amid concerns over ballooning debt eroding currency values.
Gold ETFs have seen four straight weeks of inflows, with holdings rising monthly except for May, per World Gold Council data. Other precious metals rallied sharply—palladium surged 7.1% to a near three-year high, while platinum breached $2,000/oz for the first time since 2008, marking an eighth consecutive gain.
After a pullback from October’s peak (deemed overheated), gold has rebounded strongly, setting the stage for sustained gains into 2026. Goldman Sachs forecasts further upside, with a base-case target of $4,900/oz, citing ETF investors competing with central banks for limited physical supply.
Wu highlighted central bank demand, physical buying, and geopolitical hedging as "long-term anchors," while Fed policy and real rates drive cyclical swings. New market entrants like stablecoin issuer Tether Holdings SA and corporate treasuries are broadening gold’s "capital base," enhancing demand resilience.
Silver’s rally reflects speculative inflows and supply dislocations lingering after October’s historic short squeeze. Shanghai silver futures volumes recently neared levels seen during earlier tightness. Platinum’s surge follows tightening London stocks, with 124% year-to-date gains as banks stockpile metal in the U.S. to hedge tariff risks and Chinese exports stay robust.
At press time, spot gold rose 0.26% to $4,456/oz, silver edged up 0.16% to $69.18/oz, while the Bloomberg Dollar Spot Index dipped 0.03%. Nicholas Frappell of Sydney’s ABC Refinery cited Fed easing prospects and geopolitical risks—including Ukraine tensions and Trump’s security strategy—as key drivers, alongside Japan-China frictions and Venezuela’s crisis.
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