Gold is on track for weekly gains, but what's driving this surge?
Amid expectations of a US interest rate cut and escalating geopolitical tensions, gold is poised for its second consecutive weekly gain, trading near $4,320 an ounce, close to its all-time high.
This surge followed data showing US inflation slowing to 2.7% in November, below expectations of 3.1%, reinforcing market expectations that the Federal Reserve will begin a rate-cutting cycle.
Gold's current performance
Gold prices have had a historic year, rising by approximately 65% since the beginning of 2025, marking their strongest annual gains since 1979.
As of the opening of trading on Friday, December 19, 2025, the precious metal has been trading near $4,323 an ounce, after reaching a record high of $4,381.60 earlier this month.
Key Factors Affecting Gold Prices
1. US Monetary Policy Expectations
The unexpected drop in US inflation to 2.7% in November has bolstered investor expectations that the Federal Reserve may soon begin cutting interest rates.
- Markets currently price in a 25% probability of an interest rate cut in January 2026, with a near certainty of a cut by April.
- Lower interest rates typically increase the appeal of gold as a non-yielding asset compared to income-generating assets, driving demand and pushing up prices.
2. Geopolitical Tensions
Multiple geopolitical risks have contributed to supporting demand for gold as a traditional safe haven:
- Ukraine tensions: with Russian President Vladimir Putin reasserting his territorial claims.
- Venezuela crisis: with the US suspending shipments of sanctioned Venezuelan oil following the seizure of an oil tanker.
- Gold is considered a safe haven for investors during periods of instability, helping to preserve capital.
3. Strong Demand from Central Banks and Investors
Gold is experiencing a fundamental shift in investor sentiment, with capital flows increasingly directed towards tangible assets:
- Central banks have increased their gold reserves at record rates since 2022, with 85% of their officials considering gold a safe haven during crises.
- Institutional and sovereign investors are seeking assets outside the traditional financial system, weakening the traditional inverse correlation between gold and US real returns.
Future Outlook for Gold Prices
Future outlook suggests continued upward movement, with varying predictions:
- In the near term (end of 2025): Analysts expect the price to rise to a range between $4,400 and $4,500 per ounce.
- During 2026: Some major financial institutions, such as Goldman Sachs and Bank of America, predict that the price of gold will reach $5,000 per ounce, driven by continued expectations of interest rate cuts and trade policies.
Ultimately, gold's future appears promising given the current economic and geopolitical environment.
This year's record performance indicates a strategic shift in investor preferences, with a strong inclination towards gold as a safe-haven asset.
However, investors should closely monitor developments in US economic data, particularly inflation and labor market figures, which will inform the Federal Reserve's monetary policy, as well as the pace of geopolitical escalation in conflict zones such as Ukraine and the Middle East.
As an investment, gold remains a historically safe haven during turbulent times and a key element for portfolio diversification and mitigating systemic risk in an increasingly volatile world.
