Silver within a whisker of $100/oz; gold nears $5,000—what’s behind the rally?

It seems as if there is no stopping the ongoing rally in precious metals prices. 

Gold and silver hit fresh record highs on Friday as bets on an interest rate cut by the US Federal Reserve increased amid geopolitical uncertainties. 

Lower interest rates increase the appeal of precious metals as they are non-yielding assets, unlike Treasury bonds. 

Gold on COMEX came nearly hit the coveted $5,000 per ounce level on Friday as prices reached a record high of $4,969.69 an ounce earlier in the day. 

Similarly, silver hit a record high of $99.395 per ounce, and it seems the white metal is likely to hit a historic $100 per ounce sooner rather than later. 

On Friday, the dollar was trading near a more than two-week low, having depreciated by 1% over the week.

This made metals priced in the greenback more affordable for international buyers. 

Meanwhile, Wall Street's main indexes experienced a sharp sell-off earlier in the week due to investor anxiety stemming from fresh tariff threats against the EU made by US President Donald Trump, though the markets later recovered.

Precious metals rise despite easing tensions

EU leaders, meeting for an emergency summit in Brussels late on Thursday, were relieved by Trump's reversal on Greenland. 

However, they simultaneously issued a stern warning, stating their readiness to take action should Trump issue any further threats.

Despite US President Trump reversing his position on Greenland, which eased geopolitical tensions, both gold and silver are still poised to achieve significant weekly gains.

The price gains followed an announcement by Trump on Wednesday afternoon that he would hold off on imposing tariffs on European nations that had opposed his efforts to acquire Greenland. 

The President cited a newly established "framework of a future deal" concerning the island as the reason for his decision.

Denmark emphasized that its sovereignty over the island is not negotiable, and the specifics of any agreement continue to be undisclosed.

“This, in turn, remains supportive of the upbeat market mood, which tends to undermine demand for traditional safe-haven assets, albeit it does little to dent the strong bullish sentiment surrounding the bullion,” Haresh Menghani, editor at FXStreet, said in a report. 

Economic data and Fed outlook

The US economy's GDP for the third quarter saw an upward revision in its final reading, expanding by 4.4%. 

This performance was marginally higher than the second estimate of 4.3% and significantly exceeded the 3.8% growth rate reported in the preceding quarter, according to data released by the Bureau of Economic Analysis.

The US Core Personal Consumption Expenditures Price Index (PCE) – the Federal Reserve's preferred measure of inflation – saw an acceleration in its year-over-year growth in November, rising to 2.8% from 2.7% the month before, according to a separate report. 

However, the month-over-month increase remained consistent at 0.2%.

US Department of Labor data showed initial claims for state unemployment benefits rose by 1,000 to a seasonally adjusted 200,000 for the week ending January 17. 

Although this was below the 212,000 consensus estimate, it did not boost the US dollar.

Investors appear to be confident that the US Fed will maintain its key interest rate until the end of this quarter, potentially even through the conclusion of Chair Jerome Powell's term in May. 

Despite this expectation, market predictions still include two more rate cuts in 2026, a prospect that continues to put pressure on the US dollar and support bullion prices.

Even as both gold and silver approach their respective historic landmarks, experts caution about pullbacks in prices.

Trade Nation’s senior market analyst, David Morrison, said: