The price of gold has climbed to a seven-week peak, securing a solid weekly advance. This move follows the latest policy decision from the U.S. Federal Reserve, which has provided a supportive backdrop for the non-yielding precious metal. The central bank’s action, coupled with shifting expectations for its future path and key economic data, is driving the current rally.
A Confluence of Supportive Factors
On Wednesday, the Federal Reserve implemented its third interest rate reduction of the year, lowering the benchmark rate by 25 basis points to a target range of 3.50% to 3.75%. In his commentary, Chair Jerome Powell indicated that further rate hikes are highly unlikely. However, the market’s outlook appears even more dovish than the Fed’s official projections. Futures markets are currently pricing in two additional rate cuts for 2026, exceeding the single reduction outlined in the Fed’s own forecasts. This discrepancy enhances the appeal of assets like gold that do not offer interest.
Adding to the liquidity picture, the Fed announced plans to purchase approximately $40 billion in short-term Treasury bills. This action helps to cap short-term yields and generally benefits asset classes that thrive in a lower-rate environment.
Key Drivers Summarized:
* The Fed’s 25-basis-point rate cut, its third this year.
* A federal funds rate corridor now set at 3.50–3.75%.
* Market anticipation of two further rate cuts in 2026.
* Planned Fed Treasury purchases worth around $40 billion.
* The U.S. dollar hitting an eight-week low.
* U.S. initial jobless claims reaching their highest level in over two months.
* Ongoing geopolitical tensions bolstering safe-haven demand.
As of the latest data, gold traded at $4,310.50 per ounce, marking a new 52-week high and representing a gain of roughly 2.6% over the past 30 days. With a Relative Strength Index (RSI) reading of 57.7, the metal’s momentum appears neutral, showing no immediate technical signs of being overbought.
Economic Data and Dollar Dynamics Provide Tailwinds
Recent economic indicators have further fueled the bullish case for gold. For the week ending December 6, initial jobless claims rose more than anticipated, reaching their highest point in more than two months. This softness in the labor market fuels speculation that the Fed may be compelled to adopt a more cautious, potentially easier, policy stance in the coming year.
Simultaneously, the U.S. dollar has weakened, falling to an eight-week low against a basket of major currencies. A softer dollar makes gold less expensive for international buyers, supporting physical demand.
Furthermore, U.S. inflation remains persistently above the Fed’s 2% target. Historically, rate cuts in an elevated inflation environment are seen as supportive for gold, as the metal is traditionally viewed as a hedge against purchasing power erosion. The combination of easier monetary policy, persistent inflation, and a weaker dollar forms a compelling foundation for the metal’s recent strength.
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Structural Demand Remains a Pillar of Support
Beyond short-term cyclical factors, structural demand for gold continues to demonstrate resilience. Central banks, with China being a prominent example, persist in expanding their gold reserves. These purchases often have a stabilizing effect on the market, as they are typically less tactically driven than the activities of speculative traders.
Another development comes from India, where the national pension regulator has permitted pension funds to invest in gold and silver exchange-traded funds (ETFs). This policy change opens a new channel for long-term institutional capital to flow into the precious metal, underscoring its evolving role in formal portfolio strategy.
Silver Outpaces Gold in a Powerful Rally
While gold tests multi-week highs, silver is exhibiting even greater momentum. On Thursday, the silver price reached a fresh all-time high of $61.46 per ounce. The white metal has surged over 9% for the week and has more than doubled in value year-to-date.
Primary catalysts for silver include:
* Its recent inclusion on the U.S. list of critical minerals.
* Substantial inflows into silver-backed ETFs.
* Tangible physical supply constraints.
In comparison, gold’s recent advance appears more measured, though it benefits indirectly from the improved overall sentiment toward precious metals.
Geopolitics and the Path Ahead
Geopolitical uncertainty continues to underpin demand for traditional safe havens. Ongoing tensions surrounding the Russia-Ukraine peace process and persistent strains between the United States and Venezuela are prompting investors to seek assets like gold for capital preservation.
In the immediate term, market attention is turning to the upcoming release of U.S. Non-Farm Payrolls data on December 16. A weaker-than-expected jobs report could amplify expectations for additional Fed easing, providing further support for gold. Conversely, a surprisingly strong labor market reading might trigger a consolidation phase following the metal’s push to a new 52-week high at $4,310.50. In either scenario, the data will offer crucial insight into the scope of monetary policy flexibility the Fed may exercise in the coming year, and by extension, the potential runway for gold.
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