Gold is poised to deliver its strongest annual performance in over four decades, with market momentum now targeting a price of $4,500 per ounce. The precious metal, currently trading near $4,240, has gained approximately 58% this year. This surge is being driven by a combination of anticipated shifts in U.S. monetary policy, sustained central bank purchasing, and a weakening U.S. dollar.
Monetary Policy Expectations Fuel the Advance
All eyes are on the Federal Reserve’s upcoming policy meeting on December 9th and 10th. Market indicators, specifically the CME FedWatch Index, now price in an 87% to 88% probability of a 25-basis-point rate cut. This would lower the benchmark interest rate target range to 3.50%-3.75%. Recent economic data has solidified these expectations. Last week’s private payrolls report showed the most significant decline in two and a half years, while consumer spending growth remained muted. Such figures have bolstered the case for policy easing, which typically enhances the appeal of non-yielding assets like gold.
A softer dollar, with the DXY index hovering near a one-month low from December 4th, provides an additional tailwind by making dollar-priced gold cheaper for international buyers.
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Institutional Demand Provides a Solid Foundation
Central bank activity continues to be a cornerstone of gold’s strength. The People’s Bank of China has been a consistent buyer, adding to its reserves for a thirteenth consecutive month. Its November purchase of an additional 30,000 fine ounces brings its total reported holdings to approximately 74.12 million fine ounces. This persistent institutional demand, set against a backdrop of geopolitical uncertainty, creates a durable base for the current price rally.
Market Outlook and Related Movements
Analysts see further room for growth. UBS strategist Giovanni Staunovo has identified a price target of $4,500 by 2026, citing the supportive environment of lower interest rates and robust central bank buying. The final key labor market indicator before the Fed’s decision, the JOLTS report, is due on Tuesday. Market participants believe the combination of prospective monetary easing and structural institutional demand will continue to support gold prices. Achieving the $4,500 milestone appears increasingly plausible if the Fed maintains a loosening trajectory into the next year.
In a related development, silver—often seen as gold’s more volatile counterpart—reached a record high of $59.32 per ounce on Friday, underscoring the broad strength in the precious metals complex.
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