Gold Recovers, Will Global Uncertainty Support Another Rise?
Gold prices rebounded in the Asian session on Tuesday, after experiencing their biggest one-day drop since October, amid an influx of safe-haven demand and hopes of a Federal Reserve interest rate cut in 2026. Gold traded higher above $4,350, recovering some of its earlier losses, which were caused by a hike in margins on gold and silver futures contracts by the Chicago Mercantile Exchange (CME), triggering profit-taking and portfolio rebalancing.
Despite the sharp decline, the prospect of a US interest rate cut in 2026 is expected to limit the potential downside in gold prices. Lower interest rates will reduce the opportunity cost of holding gold, increasing the appeal of the non-yielding precious metal. Furthermore, global economic uncertainty and geopolitical tensions continue to support gold prices.
However, trading volumes are expected to remain low ahead of the New Year holiday, as traders prepare for the release of the FOMC meeting minutes on Tuesday, which are expected to provide further clues on US monetary policy. This could provide fresh impetus for gold prices, depending on signals about the pace of policy easing the Fed might take.
In recent days, geopolitical tensions have also impacted the market, with a purported Ukrainian drone attack on the Russian President's residence triggering a shift in Moscow's stance on peace talks. This escalation in international tensions could further support demand for gold as a safe haven asset amid global uncertainty.
Key Points:
- Gold strengthened after a sharp decline, influenced by safe-haven flows and expectations of a Fed interest rate cut in 2026.
- Increased margins in the futures market led to profit-taking, but gold's downside potential is expected to be limited.
- Expected interest rate cuts could increase gold's appeal, with more investors seeking non-yielding assets.
- Rising geopolitical tensions, including drone attacks in Ukraine, support demand for gold as a safe haven asset.
- The FOMC minutes on Tuesday could provide fresh impetus for gold prices, depending on US monetary policy. (asd)
Source: Newsmaker.id
