Expectations about interest rates in the US have changed very quickly and strongly over the past six weeks. At the most recent monetary policy meeting, Federal Reserve Chairman Jerome Powell warned that a December rate cut is not a certain thing. This "hawl" sound has caused the market to immediately eliminate the possibility of cutting interest rates.
However, relatively stable inflation and data showing a clear stagnation in the US labor market have brought back the possibility of interest rate cuts, less than a week before the meeting.
According to CME's FedWatch tool, the market had priced the probability of a rate cut in late October at up to 90%, then fell sharply to just 30% after the FOMC meeting in November. Currently, the market is once again betting on a nearly 90% chance that the Fed will ease policy at the last meeting of 2025.
This instability has made the gold market more volatile, as precious gold prices recovered from the November bottom around $3,900/ounce. However, before the end of the week, gold prices seem to be "stuck" at 4,200 USD/ounce, unable to surpass the peak of last week.
Although gold is still showing quite resilient strength, some experts believe that there needs to be a new boost to bring prices back to a record peak in October. As 2025 is gradually coming to an end, this is considered a big challenge.
Mr. Aaron Hill - Head of Market Analysis at FP Markets - commented: "The outlook for gold in the coming time will depend on whether the Fed continues to loosen, as well as macroeconomic factors such as weak growth or escalating geopolitical risks.
To reach new record highs, gold needs a combination of strong interest rate cuts, a weaker US dollar and increased safe-haven demand. Breaking into unprecedented price zones before the end of the year will require more than just a rate cut an economic shock or more obvious dovish signals from the Fed could be a catalyst.
In addition to the interest rate decision, Ms. Barbara Lambrecht - commodity analyst at Commerzbank - said she is particularly interested in the Fed's policy orientation and future interest rate forecast, also known as the " dot plot chart".
In the September Economic Forecast Summary (SEP), the Fed signaled that there will be two interest rate cuts next year. However, concerns about a weak economy and expectations of increased pressure and political impact are raising speculation that the Fed may cut interest rates more strongly next year.
If FOMC members expect more rate cuts than expected in September, it could push gold prices higher, especially as the market has barely priced in the possibility of a rate cut at its meetings early next year, said Lambrecht.
Mr. Lukman Otunuga - senior market analyst at FXTM - said that gold prices will fluctuate strongly due to uncertainties surrounding the Fed's monetary policy orientation.
Its worth noting that the market is expecting the US to cut interest rates for the third time this year, but the outlook for 2026 is much more unpredictable. The lack of the latest data on the non-farm payrolls (NFP) in October and CPI has forced officials to make decisions in the context of incomplete information, in the context of the FOMC being more divided than in recent years.
Therefore, any surprise can cause gold to fluctuate strongly. Technically, if gold breaks above $4,240, prices could head toward $4,300 an ounce. Conversely, if weaken below $4,200, prices could fall to $4,180/ounce or $4,160/ounce," he said.
Meanwhile, Mr. Eric Strand - founder of AuAg Funds precious metals fund, said that although gold is moving sideways above the $4,000/ounce mark, the market still has many opportunities.
According to him, the psychology in the gold market is much more persistent than just a rate decision. Regardless of how the Fed acts or signals next week, according to Mr. Strand, the only long-term trend of interest rates is still to go down.
He said that not only should interest rates be reduced, but to truly reduce borrowing costs, the Fed must also implement a strongQE program.
Huge deficits and public debt mean that a huge amount of money will have to be printed. For that reason, gold will continue to increase despite current prices. Now is the time to buy gold, otherwise you will continue to be slow" - he said.
