Gold heads for weekly gains and nears record high
Gold traded around $4,280 per ounce on Friday, holding high levels near its 7-week high and heading for weekly gains.
The jump came amid strong support from renewed market expectations of a monetary easing path from the US Federal Reserve, especially after data showed a new slowdown in the labor market.
Economic data defies the Fed's expectations
Gold currently stands at a turning point that is strongly influenced by US data and monetary policy:
- A slowing labor market: Jobless claims, which rose to the highest level in more than two months, reinforced expectations that the Fed may resort to two rate cuts in 2026.
- The Fed's plan: The Fed cut rates for the third time this year, and Chairman Jerome Powell signaled that a rate hike is practically out of the question.
However, the Fed's own projections (one cut in 2026) remain more conservative than the pessimistic market expectations (two cuts in 2026).
- Direct liquidity support: The Fed announced the purchase of $40 billion in Treasuries to ease pressures, a measure that is expected to support precious metals.
A look into the future: Gold Forecast for 2026
After an extraordinary 2025 in which gold set more than 50 new record highs and returned more than 60%, investors are turning their attention to 2026.
Three key scenarios, based on a World Gold Council report, outline the likely trajectory:
1- The ongoing economic meeting
If global economic growth continues at a business-as-usual rate and inflation gradually declines with interest rate cuts, gold may move in a limited sideways range [-5% to +5%] around its current levels.
2- Slight economic slippage
If global growth slows and economic risks increase, the Fed may be forced to cut rates further. In this case, gold could realize moderate gains of 5% to 15%.
3- The "cycle of decline" scenario
If the global economy enters a severe recession accompanied by a sharp rise in geopolitical risks, a mass flight to safe havens could push gold to make strong jumps of up to 15%-30%.
Vital indicators: Where is global demand for gold concentrated?
The current support for gold prices comes not only from short-term speculation, but also from strong structural sources of demand:
-Central Banks: Institutions such as JP Morgan expect central bank purchases to remain above average in 2026, driven by their desire to diversify their reserves away from the US dollar.
-Individual investors: Investment holdings of gold (such as bars, coins, and gold ETFs) are at their highest levels since 2011, as individuals seek a hedge against volatility and rising inflation.
Risks and Cautions for Investors
Despite the positive picture, investors should note some risks:
- Conflicting expectations: There is a clear disconnect between the Fed's expectations (one cut in 2026) and the market's expectations (two cuts).
Any strong US economic data could diminish cut expectations and put pressure on gold.
- Extreme technical indicators: Some analysts have warned that the rapid rally has put gold in technically overbought territory, increasing the likelihood of a short-term price correction.
- Local volatility: In Arab countries, local prices react to global prices as well as exchange rate fluctuations and local seasonal factors.
In the end, gold is currently experiencing a strong upward push on expectations of a US interest rate cut and continued institutional demand.
Gold remains an attractive safe haven and an effective means of portfolio diversification. Investors should look at the yellow metal from a long-term perspective, taking into account short-term risks and keeping an eye on the policies of major central banks.
