Gold Trading Alert: Is a Market Surge Imminent? The Prospect of a Fed Rate Cut Could Ignite a Super Bull Market of $5,000!
2025-12-03 07:55:20
Despite a slight pullback in the short term due to profit-taking, multiple positive factors are quietly accumulating, with investors' attention firmly focused on the upcoming Federal Reserve policy meeting. Currently, spot gold prices are fluctuating around $4,200 per ounce, with market sentiment wavering between expectations of interest rate cuts and economic data. Analysts generally believe that this is not just a short-term fluctuation, but rather a prelude to higher peaks. Looking back at Tuesday's performance, gold prices retreated after hitting a six-week high, but rebounded strongly at the end of the session, showing strong support from bargain hunters. Meanwhile, the surge in global central bank gold purchases, the decline in US Treasury yields, and escalating geopolitical tensions all provide a solid foundation for gold. In early Asian trading on Wednesday (December 3), spot gold traded in a narrow range, currently hovering around $4,208.69 per ounce.
Gold prices experienced a typical profit-taking process on Tuesday, with spot gold hitting a low of around $4,164, a drop of approximately 1.5%. This was mainly due to some investors locking in profits after Monday's six-week high, leading to increased short-term selling pressure. However, this pullback is not a sign of market weakness, but rather a healthy correction. In the late session, gold prices quickly rebounded above $4,200, ultimately closing at $4,205.57 per ounce, narrowing the decline to 0.6%. This was thanks to the continued decline in the US dollar index and the pullback in US Treasury yields, factors that attracted medium- to long-term investors to buy on dips.
Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, pointed out that this profit-taking is only temporary, and the market is in a continuation pattern that will eventually break upwards. He even optimistically predicts that gold may reach the $5,000 milestone at the beginning of the new year.
Recent US economic data has shown signs of cooling, such as weaker-than-expected manufacturing figures, further enhancing gold's appeal as a safe-haven asset. Against this backdrop, gold's short-term fluctuations appear more like a build-up of momentum, paving the way for future price increases.
The Federal Reserve's policy moves are undoubtedly a core variable influencing gold prices. Currently, the market is pricing in an 89% probability of the Fed cutting interest rates by 25 basis points at its December meeting, a significant increase from 63% a month ago. This is attributed to dovish signals from Fed policymakers and signs of a cooling US economy.
Weaker-than-expected manufacturing data released on Monday further increased pressure for interest rate cuts. Investors are closely watching key upcoming data releases, including Wednesday's November ADP employment report and Friday's September personal consumption expenditures (PCE) index, the Fed's preferred inflation gauge. While these data may not overturn the decision to cut rates, they will provide further guidance on the Fed's interest rate path.
Jay Barry, global head of interest rate strategy at JPMorgan Chase, said that if the economy resumes trend-based growth and the labor market stabilizes, the Federal Reserve is unlikely to lower interest rates to the neutral level of 3%, as inflation remains above the 2% target. Only a significant weakening of the labor market would prompt a more aggressive rate cut.
Currently, while the US economy is showing signs of pressure among low-income consumers, overall labor income remains robust, implying that interest rate cuts will be implemented gradually. It's worth noting that US President Trump plans to announce his successor to Powell as Federal Reserve Chairman early next year. White House economic advisor Hassett, a leading dovish candidate, is a likely candidate whose potential appointment could further amplify expectations of easing policies, providing a long-term positive for gold.
Central bank purchases worldwide are another strong support for the gold market. Data from the World Gold Council shows that central banks made net purchases of 53 tons of gold in October, a 36% increase month-over-month, marking the largest monthly demand since early 2025.
This trend reflects central banks' continued preference for gold as a reserve asset, especially against the backdrop of heightened global uncertainty. Central bank gold purchases not only provide a stable demand base but also boost market confidence, helping gold prices withstand short-term volatility.
Recent data shows that this purchase volume is far above average, suggesting that central banks are using gold to hedge against geopolitical risks and currency devaluation pressures. For investors, this means that the supply and demand dynamics for gold are tilting towards the bulls, and even if there is a short-term pullback, it is unlikely to reverse the long-term upward trend.
US Treasury yields are highly negatively correlated with gold prices. On Tuesday, US Treasury yields were flat or slightly lower, with the 10-year benchmark yield falling 1.1 basis points to 4.085%, retreating from a near two-week high. The 30-year yield also slightly decreased to 4.737%. This shift stemmed from a change in market focus from a potential rate hike by the Bank of Japan to the Federal Reserve's rate-cutting path.
On Monday, comments from Bank of Japan Governor Kazuo Ueda regarding interest rate hikes boosted global yields, but on Tuesday, the Federal Reserve factor took over. With Fed officials currently in a blackout period and unable to comment publicly, investors are relying more heavily on upcoming data such as US services sector figures and unemployment claims to determine the path of interest rates.
Meanwhile, the US dollar index continued to fall 0.1% to 99.32, marking its sixth consecutive day of decline, mainly due to the potential dovish nomination of Trump as Federal Reserve Chair. If Hassett takes office, his dovish stance could further depress the dollar, enhancing the attractiveness of gold. These dynamics combined to lower the opportunity cost of holding gold by reducing US Treasury yields, driving a rebound in gold prices from their lows.
Geopolitical factors have always been a catalyst for gold. Recently, Russian President Vladimir Putin and US Special Envoy Sergei Vitkov held nearly five hours of closed-door talks on the Ukraine issue, discussing several options, including the territorial issue. Although both sides agreed not to disclose the substantive content, Russian presidential aide Ushakov stated that the talks were productive but no compromise was reached; some US proposals were acceptable, while others were unsuitable. This indicates that uncertainty remains in the Ukraine situation, and Russia and the US will maintain contact at the presidential aide level. A meeting between Putin and Trump depends on the progress of mediation.
Furthermore, US President Trump made a strong statement on Tuesday, saying that any country trafficking illegal drugs to the United States could be attacked. He specifically mentioned Colombia's cocaine problem and tensions with Venezuela, noting that US troops have been massing in the Caribbean. These remarks provoked a rebuttal from Colombian President Petro, further escalating international tensions. These events fueled risk aversion, prompting investors to turn to gold as a safe haven.
Combined with the upcoming release of the US November ADP employment change, September import price index month-on-month rate, September industrial production month-on-month rate, and November ISM non-manufacturing PMI data, if these figures indicate economic weakness, this, coupled with geopolitical risks, will further amplify the upward potential of gold.
(Spot gold daily chart, source: FX678)
In conclusion, while the gold market faces short-term profit-taking pressure, multiple factors, including expectations of a Fed rate cut, strong central bank gold purchases, declining US Treasury yields, a weakening dollar, and geopolitical uncertainties, are collectively driving an upward breakout. Looking ahead, with the new year approaching, the $5,000 target is not out of reach. Investors should closely monitor the Fed meeting results and key economic data.
At 07:51 Beijing time, spot gold was trading at $4214.62 per ounce.
Gold prices rebounded resiliently amid profit-taking.
Gold prices experienced a typical profit-taking process on Tuesday, with spot gold hitting a low of around $4,164, a drop of approximately 1.5%. This was mainly due to some investors locking in profits after Monday's six-week high, leading to increased short-term selling pressure. However, this pullback is not a sign of market weakness, but rather a healthy correction. In the late session, gold prices quickly rebounded above $4,200, ultimately closing at $4,205.57 per ounce, narrowing the decline to 0.6%. This was thanks to the continued decline in the US dollar index and the pullback in US Treasury yields, factors that attracted medium- to long-term investors to buy on dips.
Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, pointed out that this profit-taking is only temporary, and the market is in a continuation pattern that will eventually break upwards. He even optimistically predicts that gold may reach the $5,000 milestone at the beginning of the new year.
Recent US economic data has shown signs of cooling, such as weaker-than-expected manufacturing figures, further enhancing gold's appeal as a safe-haven asset. Against this backdrop, gold's short-term fluctuations appear more like a build-up of momentum, paving the way for future price increases.
Fed Rate Cut Expectations: Market Pricing in Dovish Signals at 89%
The Federal Reserve's policy moves are undoubtedly a core variable influencing gold prices. Currently, the market is pricing in an 89% probability of the Fed cutting interest rates by 25 basis points at its December meeting, a significant increase from 63% a month ago. This is attributed to dovish signals from Fed policymakers and signs of a cooling US economy.
Weaker-than-expected manufacturing data released on Monday further increased pressure for interest rate cuts. Investors are closely watching key upcoming data releases, including Wednesday's November ADP employment report and Friday's September personal consumption expenditures (PCE) index, the Fed's preferred inflation gauge. While these data may not overturn the decision to cut rates, they will provide further guidance on the Fed's interest rate path.
Jay Barry, global head of interest rate strategy at JPMorgan Chase, said that if the economy resumes trend-based growth and the labor market stabilizes, the Federal Reserve is unlikely to lower interest rates to the neutral level of 3%, as inflation remains above the 2% target. Only a significant weakening of the labor market would prompt a more aggressive rate cut.
Currently, while the US economy is showing signs of pressure among low-income consumers, overall labor income remains robust, implying that interest rate cuts will be implemented gradually. It's worth noting that US President Trump plans to announce his successor to Powell as Federal Reserve Chairman early next year. White House economic advisor Hassett, a leading dovish candidate, is a likely candidate whose potential appointment could further amplify expectations of easing policies, providing a long-term positive for gold.
Central bank gold purchases and global demand: Net purchases of 53 tons hit a new high for the year
Central bank purchases worldwide are another strong support for the gold market. Data from the World Gold Council shows that central banks made net purchases of 53 tons of gold in October, a 36% increase month-over-month, marking the largest monthly demand since early 2025.
This trend reflects central banks' continued preference for gold as a reserve asset, especially against the backdrop of heightened global uncertainty. Central bank gold purchases not only provide a stable demand base but also boost market confidence, helping gold prices withstand short-term volatility.
Recent data shows that this purchase volume is far above average, suggesting that central banks are using gold to hedge against geopolitical risks and currency devaluation pressures. For investors, this means that the supply and demand dynamics for gold are tilting towards the bulls, and even if there is a short-term pullback, it is unlikely to reverse the long-term upward trend.
US Treasury yields and the dollar's performance: The downward trend helps gold rebound.
US Treasury yields are highly negatively correlated with gold prices. On Tuesday, US Treasury yields were flat or slightly lower, with the 10-year benchmark yield falling 1.1 basis points to 4.085%, retreating from a near two-week high. The 30-year yield also slightly decreased to 4.737%. This shift stemmed from a change in market focus from a potential rate hike by the Bank of Japan to the Federal Reserve's rate-cutting path.
On Monday, comments from Bank of Japan Governor Kazuo Ueda regarding interest rate hikes boosted global yields, but on Tuesday, the Federal Reserve factor took over. With Fed officials currently in a blackout period and unable to comment publicly, investors are relying more heavily on upcoming data such as US services sector figures and unemployment claims to determine the path of interest rates.
Meanwhile, the US dollar index continued to fall 0.1% to 99.32, marking its sixth consecutive day of decline, mainly due to the potential dovish nomination of Trump as Federal Reserve Chair. If Hassett takes office, his dovish stance could further depress the dollar, enhancing the attractiveness of gold. These dynamics combined to lower the opportunity cost of holding gold by reducing US Treasury yields, driving a rebound in gold prices from their lows.
Geopolitical risks: US-Russia talks and escalating drug war fuel risk aversion.
Geopolitical factors have always been a catalyst for gold. Recently, Russian President Vladimir Putin and US Special Envoy Sergei Vitkov held nearly five hours of closed-door talks on the Ukraine issue, discussing several options, including the territorial issue. Although both sides agreed not to disclose the substantive content, Russian presidential aide Ushakov stated that the talks were productive but no compromise was reached; some US proposals were acceptable, while others were unsuitable. This indicates that uncertainty remains in the Ukraine situation, and Russia and the US will maintain contact at the presidential aide level. A meeting between Putin and Trump depends on the progress of mediation.
Furthermore, US President Trump made a strong statement on Tuesday, saying that any country trafficking illegal drugs to the United States could be attacked. He specifically mentioned Colombia's cocaine problem and tensions with Venezuela, noting that US troops have been massing in the Caribbean. These remarks provoked a rebuttal from Colombian President Petro, further escalating international tensions. These events fueled risk aversion, prompting investors to turn to gold as a safe haven.
Combined with the upcoming release of the US November ADP employment change, September import price index month-on-month rate, September industrial production month-on-month rate, and November ISM non-manufacturing PMI data, if these figures indicate economic weakness, this, coupled with geopolitical risks, will further amplify the upward potential of gold.
(Spot gold daily chart, source: FX678)
In conclusion, while the gold market faces short-term profit-taking pressure, multiple factors, including expectations of a Fed rate cut, strong central bank gold purchases, declining US Treasury yields, a weakening dollar, and geopolitical uncertainties, are collectively driving an upward breakout. Looking ahead, with the new year approaching, the $5,000 target is not out of reach. Investors should closely monitor the Fed meeting results and key economic data.
At 07:51 Beijing time, spot gold was trading at $4214.62 per ounce.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
