Gold prices are on a positive spree now. Early Wednesday in Europe, XAU/USD jumped above $4,350—a fresh high in a year that’s already seen gold soar 65%. If things keep going like this, we’re looking at the strongest annual run since 1979. What’s behind it? A big part comes down to growing bets that the Fed will cut interest rates again in 2026. Lower rates make gold more appealing because investors aren’t missing out on yield by holding it.
There’s more to the story, though. People want assets that maintain their value when there is uncertainty about the state of the world economy, which makes markets uneasy. Because gold fits that description, demand has remained steady despite rising prices.
Geopolitical Conflicts Increased Interest in Safe Havens
It’s not just about central banks. Geopolitics is also adding fuel. The Israel–Iran standoff and those simmering US–Venezuela tensions have kept investors on edge. Whenever things get tense, people pile into safe havens like gold. That’s been a big driver lately.
Still, this rally isn’t running on rails. The CME Group just hiked margin requirements for gold and silver futures, so traders need to put up more cash to play. Moves like this often prompt some to take profits or rebalance, especially with the New Year approaching. Add in the usual thin trading around the holidays, and you get the kind of sharp price swings that can catch people off guard.
Fed Moves and Data in the Spotlight
The Fed had reduced interest rates by 25 basis points at its December meeting, bringing the target range to 3.50%–3.75%. Most officials agreed, but not all; some wanted more aggressive reductions, while others opted to stay in place. The FOMC minutes were also explicit: the fed funds rate could certainly be lower if inflation were to fall further.
Probabilities of a cut in January fell to about 15% after the minutes dropped, according to the CME Fed Watch Tool. As the final significant data point before holiday markets slow down, traders are now focusing on US Initial Jobless Claims, which are anticipated to be 220,000.
