Gold is on the move, the world is heating up!
The price of gold (XAU/USD) strengthened to around $4,345 at the start of Friday's Asian session, approaching the $4,374 area. This movement indicates continued buying interest after a major rally throughout 2025.
The market believes the opportunity for gold to strengthen is still open due to two main drivers: expectations of a Fed interest rate cut and increasing safe-haven flows while geopolitical risks persist.
Throughout 2025, gold recorded a gain of around 65%, its largest annual gain since 1979. This surge strengthens gold's position as a safe-haven asset during times of heightened global economic and political uncertainty.
In terms of monetary policy, the Fed cut interest rates by 25 basis points at its December meeting, bringing the benchmark rate to the 3.50%–3.75% range. The main reasons were: the risk of weakness in the labor market was increasing and inflationary pressures were perceived to be easing.
However, the decision was not unanimous. Stephen Miran favored a larger cut (a jumbo cut), while Austan Goolsbee and Jeff Schmid opposed a cut and preferred a fixed interest rate. This divergence of opinion suggests that the policy direction is still under internal debate.
However, the minutes of the FOMC meeting (December 9–10) showed that a majority of officials still viewed further interest rate cuts as reasonable, as long as inflation continues to decline. Lower interest rates typically support gold because the opportunity cost of holding a non-yielding asset is lower.
In addition to interest rates, unresolved tensions between Israel and Iran and escalating US-Venezuela tensions have also boosted gold's appeal. When global conditions are unstable, investors tend to seek assets that are perceived as able to maintain value, and gold is often the preferred choice.
On the other hand, gold's rise could be restrained by profit-taking and portfolio adjustments. Furthermore, the CME Group increased margin requirements for gold, silver, and other metal futures contracts, meaning traders need to put up more funds to maintain positions, which often triggers position reductions and curbs the rate of gains.
5 key points
- Gold rose to ~$4,345 early in the Asian session, approaching $4,350.
- Gold closed 2025 up ~65%, its best since 1979.
- The Fed cut 25 bps (3.50%–3.75%), but there was internal dissent.
- FOMC Minutes: The majority still leaves open the possibility of further rate cuts if inflation falls.
- CME margin increases plus potential profit-taking could restrain gold/silver gains. (asd)
Source: Newsmaker.id
