How the Threat of Trump Tariffs Created a Wild Week For Gold & Silver

Gold and silver prices spiked, accompanied by rising futures spreads, as banks and hedge funds scrambled to cover short positions amid tariff risk concerns.

Financial markets have experienced significant volatility and uncertainty in recent weeks as President-elect Donald Trump selects his cabinet and outlines his policy roadmap for the next four years. Tariff discussions, in particular, have been a key driver of market turbulence. Last week, gold and silver saw unusual price swings: initially spiking on fears that precious metals could be included in sweeping tariff measures proposed by the incoming administration. However, by Thursday and Friday, these gains were erased as precious metals underwent a dramatic round-trip, ultimately falling back to their earlier levels.

Silver futures soared by $1.85 or nearly 6% early in the week but reversed course, erasing all gains by Thursday and Friday:

Similarly, gold futures rose by approximately $100 or 3.7% before giving it back:

Though volatility is nothing new for precious metals, what stood out last week was the abrupt surge in the prices of front-month futures contracts for silver (March) and gold (February) relative to their spot prices. This divergence highlighted the urgency with which banks and funds scrambled to reduce risk by closing out short positions, driving gold and silver prices higher. Typically, front-month futures and spot prices track each other almost perfectly, but between December 10th and 12th, they deviated significantly.

Over the past 200 trading days, front-month silver futures have traded at an average premium of $0.18 over the spot price. However, between December 10th and 12th, this premium jumped, climbing from $0.52 to a peak of $1.15 before reversing on the 12th.