Every move by the Federal Reserve determines the direction of gold prices.

After more than half a year of inaction, the Federal Reserve broke its silence in September by cutting interest rates by 25 basis points. Less than a month into October, it made a second cut of the same magnitude. By December, the market was not expecting a third rate cut, but signals of economic weakness emerged, and key figures like Federal Reserve Bank of New York President Williams began to send more dovish signals, causing the probability of a December rate cut to rise rapidly.

Looking ahead to 2026, the market has almost reached a consensus—there is at least 60 basis points of rate cut room, in other words, possibly two to three more cuts. Even though current expectations seem quite dovish, the trend of declining interest rates is far from over. It is especially important to note that Federal Reserve Chair Powell will step down in May next year, and the successor appointed by Trump is very likely to adopt a more aggressive easing policy.

The truth behind the numbers is: the opportunity cost of holding gold is rapidly decreasing. Holding gold no longer means sacrificing interest income.

Geopolitical tensions are another driving force. The Russia-Ukraine conflict remains stalemated, Middle Eastern conflicts are escalating frequently, tensions between India and Pakistan are intensifying in 2025, and the Sudan civil war is far from over. Multiple risks are stacking up, reigniting demand for safe-haven assets. As the most classic safe-haven asset, gold’s allocation value is being reactivated.