Gold prices closed 2025 with a remarkable surge, recording an annual gain of around 65%, the highest level since 1979. The surge was driven by expectations of a continued US interest rate cut in 2026 and investment inflows into safe-haven assets.
At 9.25 am, gold was at $4,346, up 0.53% since it opened in early Asian trading on Friday.
The Fed recently cut interest rates by 25 basis points to a range of 3.50%–3.75%. The decision was made despite opposition from several senior officials, including Governor Stephen Miran, who wanted a more aggressive rate cut.
The presidents of the Chicago and Kansas City Feds have also rejected the change, reflecting a diversity of opinions among policymakers.
Minutes of the FOMC meeting of December 9-10 confirmed that most officials were ready for additional cuts, depending on inflation developments. However, there was no final word on the exact rate and timing.
Lower interest rates directly reduce the cost of holding non-dividend-bearing gold, making the yellow metal increasingly attractive as an alternative investment.
Meanwhile, geopolitical tensions in the Middle East between Israel and Iran and the ongoing conflict between the US and Venezuela have added to the pressure on the market. Investors are seeking shelter as uncertainty increases, driving demand for gold.
However, gold’s rally faces headwinds. Traders are potentially taking profits and rebalancing their portfolios. In addition, the Chicago Mercantile Exchange (CME) raised margin requirements for gold and other metals, tightening the risk for speculators and potentially curbing further price increases.
While geopolitical risks and loose monetary policy support gold’s rise, traders’ margin calls and profit-taking strategies are creating a clear limit to price momentum.
The gold market is currently struggling between fundamental momentum and tight technical control.
