Gold Price Forecast: XAU/USD climbs to near $4,350 on Fed rate cut bets, geopolitical risks
- Gold price climbs to around $4,345 in Friday’s early Asian session.
- Expectations of Fed rate cuts this year and geopolitical risks could boost the Gold price.
- Increased margin requirements on gold and silver futures by the CME Group might cap the upside for precious metals.
Gold price (XAU/USD) rises to near $4,345 during the early Asian session on Friday. Gold finished 2025 with a significant rally, achieving an annual gain of around 65%, its biggest annual gain since 1979. The rally of the precious metal is bolstered by the prospect of further US interest rate cuts in 2026 and safe-haven flows.
The US Federal Reserve (Fed) decided to cut the interest rate by 25 basis points (bps) at its December policy meeting, bringing the federal funds rate to a target range of 3.50%–3.75%. Those in favor cited increased downside risks to employment and easing inflation pressures. Fed Governor Stephen Miran voted against the action in favor of a jumbo rate cut, while Chicago Fed President Austan Goolsbee and Kansas City’s Jeff Schmid dissented in favor of leaving rates unchanged.
The minutes from the Federal Open Market Committee (FOMC) meeting on December 9-10 indicated that most Fed officials viewed further interest-rate reductions as appropriate, provided inflation declines over time, although they remained divided over when and by how much to cut. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
Additionally, the persistent Israel-Iran conflict and the ongoing US-Venezuela tensions could boost the Gold price. It’s worth noting that traders seek assets that can preserve value during periods of uncertainty, which supports a traditional safe-haven asset such as Gold.
On the other hand, traders could book their profits or rebalance their portfolio, which might cap the upside for the yellow metal. The Chicago Mercantile Exchange (CME) Group, one of the world’s largest trading floors for commodities, raised margin requirements for gold, silver, and other metals. These notices require traders to put up more cash on their bets in order to insure against the possibility that the trader will default when they take delivery of the contract.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
