Gold’s Ascent Fueled by Federal Reserve Policy Shift

Gold XC0009655157

The precious metals market is experiencing a significant rally, with gold prices approaching their historic peak from October. This surge follows the Federal Reserve's third interest rate cut of the year, a move that has created a supportive environment for non-yielding assets. The combination of lower rates, a softening US dollar, and unwavering central bank demand raises questions about the durability of this upward trend.

At its recent meeting, the Federal Open Market Committee (FOMC) lowered the benchmark interest rate by 25 basis points to a target range of 3.50% to 3.75%. The immediate market reaction propelled gold above $4,220 per troy ounce, with gains extending into subsequent sessions.

Prices climbed to a peak of $4,349 on Thursday and Friday, placing the metal just dollars below its October record of $4,382. This represents a recovery of over 12% from the low seen in October. The current technical landscape shows a market that is advanced but not yet in extreme territory.

Key Metrics as of Friday's Close:
* Price: $4,329.80 per troy ounce
* Weekly Change: +2.42%; Monthly Change: +3.06%
* 52-Week High: $4,329.80 (Dec 12, 2025); Distance: 0%
* 52-Week Low: $3,941.30; Distance: +9.86%
* 14-Day RSI: 57.7
* 30-Day Annualized Volatility: 14.45%

Divergent Signals from the Fed

While the rate cut itself provided impetus, the Fed's forward guidance introduced nuance. The central bank's projections now anticipate only one additional cut in 2026, with inflation not expected to reach its 2% target until 2028. Notably, three FOMC members dissented against the latest cut, marking the first such split in over five years. Concurrently, the Fed announced plans to purchase approximately $40 billion in short-term US Treasury securities.

This mixed messaging creates a dual effect: current accommodative policy supports gold, while a more cautious long-term outlook tempers expectations for an aggressive easing cycle. This tension is a defining characteristic of the current price action.

Structural Demand and a Weaker Dollar

A fundamental pillar of strength continues to be robust central bank acquisitions. Global banks purchased a net 53 tonnes of gold in October, a 36% increase from the previous month. Poland's central bank has been particularly active, adding 83 tonnes since the start of the year.

Other significant official sector buyers in October included:
* Brazil (16 tonnes, its second consecutive month of buying)
* Uzbekistan (9 tonnes)
* Indonesia (4 tonnes)
* Turkey (3 tonnes)
* China (extending its buying streak to a 13th consecutive month)

These consistent inflows provide a stable demand base that can cushion against short-term futures market volatility. Furthermore, the US dollar's decline to an eight-week low against a basket of major currencies has made gold less expensive for holders of other currencies, adding another layer of support.

Silver's Record Run Lends Psychological Support

The rally in precious metals is broad-based, with silver achieving a new all-time high of $64.31 per ounce. Driven by supply deficits and rising industrial demand, silver has gained over 100% year-to-date in 2025. This powerful performance across the sector boosts investor confidence and increases the willingness to maintain or expand positions in gold.

Upcoming Economic Data as the Next Catalyst

The focus now shifts to key US economic releases. Delayed Non-Farm Payrolls data for October and November are due, followed closely by November's Consumer Price Index (CPI) inflation report.

Recent economic signals, including a rise in weekly jobless claims to their highest level in over two months, have already shifted market expectations. Some observers now see the potential for two Fed rate cuts in 2026, despite the official projection of only one. For gold, softer labor market and inflation data would reinforce the supportive interest rate and dollar environment. Conversely, unexpectedly strong data could apply temporary brakes to the rally.