Precious metals soared to unprecedented levels in Tuesday's trading session, December 23, with both gold and silver registering fresh historic highs. The rally was powered by a combination of renewed geopolitical worries and growing market expectations of interest rate reductions by the US Federal Reserve in the coming year.
Record-Shattering Numbers on Indian Bourses
On the Multi Commodity Exchange (MCX), the February gold futures contract opened stronger at ₹1,38,297 per 10 grams, a significant jump from its previous close of ₹1,36,744. The momentum continued, pushing prices to a new all-time peak of ₹1,38,496 per 10 grams, marking a gain of ₹1,752.
Silver displayed even more explosive strength. The March silver futures contract on MCX skyrocketed by ₹6,577 to achieve a fresh record high of ₹2,19,449 per kilogram.
The Dual Engines Driving the Rally
Geopolitical Heat: Escalating tensions between the United States and Venezuela provided a classic safe-haven boost to precious metals. The US recently intensified an oil blockade against Venezuela, increasing pressure on President Nicolás Maduro's government. This instability keeps demand for assets like gold and silver robust.
Monetary Policy Winds: Perhaps the more dominant factor is the shifting outlook for US monetary policy. Recent signs of easing inflation and a cooling labor market have solidified trader bets that the Federal Reserve will follow its three consecutive rate cuts with further reductions next year. This expectation serves a dual purpose for bullion:
- It lowers the opportunity cost of holding non-yielding assets like gold.
- It weakens the US dollar, which traded near its lowest since October. A softer dollar makes dollar-priced gold cheaper for international buyers, amplifying demand.
Spot prices in international markets reflected this fervor. Silver broke above $70 per ounce for the first time, while gold hovered near the $4,500 per ounce mark.
A Spectacular Year and the Road Ahead
The 2025 rally has been nothing short of extraordinary. Gold has surged approximately 80% this year, a rally underpinned by sustained central bank purchases and consistent inflows into gold-backed exchange-traded funds (ETFs). Data from the World Gold Council shows ETF holdings grew every month this year except May.
Silver has outperformed even gold, boasting a staggering rally of around 150% in 2025. Its recent advance was buoyed by speculative inflows and ongoing supply dislocations following a historic short squeeze in October.
After a brief retreat from an October peak of $4,381, gold has rebounded forcefully. The market consensus now leans toward extending these gains into the next year. Major financial institutions like Goldman Sachs Group Inc. are predicting further rises in 2026, with a base-case target of $4,900 per ounce and acknowledged upside risks.
Investor behavior has also been influenced by the "debasement trade," a strategic move away from sovereign bonds and certain currencies over long-term fears of eroding value due to ballooning global debt levels. Aggressive trade policies and political rhetoric have added fuel to this record-breaking bull run in precious metals.
