Gold Trading Alert: With the Fed rate cut countdown underway, is gold targeting the $5,000 mark?
2025-12-09 07:43:23
On Tuesday (December 9th) in early Asian trading, spot gold traded in a narrow range, currently hovering around $4192 per ounce. On Monday, spot gold prices retreated slightly, closing at $4190.48 per ounce, down 0.2%, while US gold futures settled down 0.6% at $4217.7 per ounce. The market is taking a brief breather ahead of the Federal Reserve policy meeting, with investors holding their breath awaiting the latest statements from Fed Chairman Powell. Meanwhile, geopolitical tensions, dollar volatility, and unexpected events such as the Japanese earthquake are all subtly influencing gold's price movements. Overall, although gold prices are under pressure in the short term, strong fundamentals support the market. Continued central bank gold purchases and safe-haven demand will continue to drive gold prices higher, with experts even predicting that gold prices could reach the $5000 per ounce milestone by the first quarter of 2026.
The Federal Reserve is about to hold a two-day policy meeting, which is undoubtedly the biggest uncertainty in the current gold market.
The market widely expects the Federal Reserve to announce a 25-basis-point rate cut on Wednesday, with a probability as high as 90%, a significant increase from 66% in November. This expectation stems from recent dovish statements by Fed officials, but analysts warn that this could be a "hawkish rate cut."
A so-called hawkish rate cut refers to the Federal Reserve lowering interest rates while simultaneously signaling caution about future easing policies through its statement wording, median forecasts, and Powell's press conference, thus raising the bar for further rate cuts. If investors consequently lower their expectations for two to three rate cuts next year, the dollar may receive support, thereby exerting short-term downward pressure on gold.
Peter Grant, Vice President of Zaner Metals, pointed out that gold's fundamentals remain strong, and continued central bank gold purchases will provide long-term support. This means that even if gold prices fall slightly in the short term, investors should not be overly pessimistic, but rather see it as a good opportunity to buy. Morgan Stanley holds a similar view, believing that a weaker dollar and strong ETF buying will further amplify the upside potential for gold.
On Monday, the US dollar index continued its gains from the end of Friday's trading session, moving away from the five-week low reached last week and briefly hitting a three-day high of 99.22 before closing at 99.11, which slightly suppressed gold prices in the short term.
Beyond monetary policy, geopolitical risks are quietly injecting new vitality into gold. At a sensitive time when Kyiv is facing pressure from the United States to reach a peace agreement with Russia, the leaders of France, Germany, and the United Kingdom met with Ukrainian President Zelensky in London and expressed strong support, calling it a "critical moment" for Kyiv. This statement not only strengthened the unity of the Western camp but also highlighted the enduring nature of the Russia-Ukraine conflict.
Historically, geopolitical tensions have often spurred safe-haven flows into the gold market. This time, the high-profile support from European leaders may further exacerbate market concerns about global stability, pushing gold to play the role of a "safe haven."
Historically, similar events such as Middle East conflicts or trade frictions have led to short-term surges in gold prices. The latest developments in the Ukraine situation undoubtedly provide additional upward momentum for gold, especially ahead of the Federal Reserve meeting, as investors are more inclined to hold gold to hedge against potential risks.
The performance of the US bond market further confirmed the cautious sentiment. On Monday, the yield on the 10-year US Treasury note rose 3.1 basis points to 4.17%, hitting its highest level since September 26; the yield on the 30-year note rose 2.1 basis points to 4.813%, a new high since September 5. News of the Japanese earthquake accelerated this rise, as investors worried about its impact on global economic growth.
The Bank of Japan, which had been under pressure to raise interest rates to curb inflation, is now facing the possibility of additional inflationary effects from the earthquake, with the market anticipating a 78.5% probability of a 25 basis point rate hike. In the US, the yield on two-year Treasury bonds rose 1.7 basis points to 3.581%, moving in tandem with the Federal Reserve's interest rate expectations. The spread between the two-year and 10-year yields widened to positive 58.7 basis points; this curve is considered an indicator of economic expectations, suggesting market optimism about future growth accompanied by uncertainty. The break-even yield on Treasury Inflation-Protected Securities (TIPS) indicates an average annual inflation expectation of approximately 2.3% over the next 10 years.
In addition, the U.S. Treasury will auction a large amount of new debt this week, including $39 billion in 10-year notes on Tuesday and $22 billion in 30-year notes on Thursday. Strong demand (such as the 2.64 bid-to-cover ratio for the three-year notes on Monday) reflects investors' preference for fixed-income assets.
Overall, rising yields tend to diminish the appeal of gold, as non-interest-bearing gold faces opportunity costs in a high-interest environment. However, given the significant disagreements within the Federal Reserve, this suppression may be temporary, and gold's anti-inflationary properties will likely become more prominent again.
(Spot gold daily chart, source: FX678)
In conclusion, despite a slight short-term dip in gold prices, hawkish expectations of a Fed rate cut, geopolitical tensions, currency volatility, and bond market reactions are all paving the way for a long-term upward trend in gold. The expert-predicted target of $5,000 is not unattainable, and investors should seize the opportunity to position themselves amidst the current cautious atmosphere. Gold is more than just a metal; it is a stabilizing force in global uncertainty, and it will continue to shine brightly in the 2026 economic outlook.
In the short term, investors should also pay attention to news regarding the international trade situation. Latest news indicates that US President Trump has stated he may impose new tariffs on agricultural products, including Canadian fertilizers and Indian rice. Trump also stated that the US has demanded Mexico release 200,000 acre-feet of water resources by December 31st, and must deliver the remainder as soon as possible thereafter. He has authorized the drafting of documents that would impose a 5% tariff on Mexican goods if Mexico fails to release the aforementioned water resources.
At 07:42 Beijing time, spot gold was trading at $4195.19 per ounce.
Fed Policy Uncertainty: Gold Trading Amid Hawkish Rate Cuts
The Federal Reserve is about to hold a two-day policy meeting, which is undoubtedly the biggest uncertainty in the current gold market.
The market widely expects the Federal Reserve to announce a 25-basis-point rate cut on Wednesday, with a probability as high as 90%, a significant increase from 66% in November. This expectation stems from recent dovish statements by Fed officials, but analysts warn that this could be a "hawkish rate cut."
A so-called hawkish rate cut refers to the Federal Reserve lowering interest rates while simultaneously signaling caution about future easing policies through its statement wording, median forecasts, and Powell's press conference, thus raising the bar for further rate cuts. If investors consequently lower their expectations for two to three rate cuts next year, the dollar may receive support, thereby exerting short-term downward pressure on gold.
Peter Grant, Vice President of Zaner Metals, pointed out that gold's fundamentals remain strong, and continued central bank gold purchases will provide long-term support. This means that even if gold prices fall slightly in the short term, investors should not be overly pessimistic, but rather see it as a good opportunity to buy. Morgan Stanley holds a similar view, believing that a weaker dollar and strong ETF buying will further amplify the upside potential for gold.
On Monday, the US dollar index continued its gains from the end of Friday's trading session, moving away from the five-week low reached last week and briefly hitting a three-day high of 99.22 before closing at 99.11, which slightly suppressed gold prices in the short term.
Geopolitical Shifts: Ukraine Crisis Boosts Safe-Haven Demand
Beyond monetary policy, geopolitical risks are quietly injecting new vitality into gold. At a sensitive time when Kyiv is facing pressure from the United States to reach a peace agreement with Russia, the leaders of France, Germany, and the United Kingdom met with Ukrainian President Zelensky in London and expressed strong support, calling it a "critical moment" for Kyiv. This statement not only strengthened the unity of the Western camp but also highlighted the enduring nature of the Russia-Ukraine conflict.
Historically, geopolitical tensions have often spurred safe-haven flows into the gold market. This time, the high-profile support from European leaders may further exacerbate market concerns about global stability, pushing gold to play the role of a "safe haven."
Historically, similar events such as Middle East conflicts or trade frictions have led to short-term surges in gold prices. The latest developments in the Ukraine situation undoubtedly provide additional upward momentum for gold, especially ahead of the Federal Reserve meeting, as investors are more inclined to hold gold to hedge against potential risks.
Bond Market Reaction: Rising Yields Indicate Economic Uncertainty
The performance of the US bond market further confirmed the cautious sentiment. On Monday, the yield on the 10-year US Treasury note rose 3.1 basis points to 4.17%, hitting its highest level since September 26; the yield on the 30-year note rose 2.1 basis points to 4.813%, a new high since September 5. News of the Japanese earthquake accelerated this rise, as investors worried about its impact on global economic growth.
The Bank of Japan, which had been under pressure to raise interest rates to curb inflation, is now facing the possibility of additional inflationary effects from the earthquake, with the market anticipating a 78.5% probability of a 25 basis point rate hike. In the US, the yield on two-year Treasury bonds rose 1.7 basis points to 3.581%, moving in tandem with the Federal Reserve's interest rate expectations. The spread between the two-year and 10-year yields widened to positive 58.7 basis points; this curve is considered an indicator of economic expectations, suggesting market optimism about future growth accompanied by uncertainty. The break-even yield on Treasury Inflation-Protected Securities (TIPS) indicates an average annual inflation expectation of approximately 2.3% over the next 10 years.
In addition, the U.S. Treasury will auction a large amount of new debt this week, including $39 billion in 10-year notes on Tuesday and $22 billion in 30-year notes on Thursday. Strong demand (such as the 2.64 bid-to-cover ratio for the three-year notes on Monday) reflects investors' preference for fixed-income assets.
Overall, rising yields tend to diminish the appeal of gold, as non-interest-bearing gold faces opportunity costs in a high-interest environment. However, given the significant disagreements within the Federal Reserve, this suppression may be temporary, and gold's anti-inflationary properties will likely become more prominent again.
(Spot gold daily chart, source: FX678)
In conclusion, despite a slight short-term dip in gold prices, hawkish expectations of a Fed rate cut, geopolitical tensions, currency volatility, and bond market reactions are all paving the way for a long-term upward trend in gold. The expert-predicted target of $5,000 is not unattainable, and investors should seize the opportunity to position themselves amidst the current cautious atmosphere. Gold is more than just a metal; it is a stabilizing force in global uncertainty, and it will continue to shine brightly in the 2026 economic outlook.
In the short term, investors should also pay attention to news regarding the international trade situation. Latest news indicates that US President Trump has stated he may impose new tariffs on agricultural products, including Canadian fertilizers and Indian rice. Trump also stated that the US has demanded Mexico release 200,000 acre-feet of water resources by December 31st, and must deliver the remainder as soon as possible thereafter. He has authorized the drafting of documents that would impose a 5% tariff on Mexican goods if Mexico fails to release the aforementioned water resources.
At 07:42 Beijing time, spot gold was trading at $4195.19 per ounce.
- Risk Warning and Disclaimer
- 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.
