By Antonio Di Giacomo, Senior Market Analyst at XS.com
The gold market is navigating a delicate balance, driven by monetary and geopolitical factors that continue to shape its behavior as 2025 draws to a close. Expectations of further rate cuts by the Federal Reserve limit the upside potential of the U.S. dollar, which continues to support gold as a non-yielding asset. At the same time, the persistent instability stemming from the Russia–Ukraine war sustains safe-haven demand, reducing the likelihood of sharp declines in the precious metal.
Following the Fed’s decision to cut rates by 25 basis points, Chair Jerome Powell adopted a more cautious tone, acknowledging the downside risks facing the U.S. labor market. His remarks strengthened expectations for additional cuts in 2026, even though the Committee projected only one more. This scenario weakened the dollar, allowing gold to reach a weekly high. However, the lack of clarity about the
future monetary policy path, along with signs of internal dissent within the central bank, adds to the uncertainty, limiting the rally’s momentum.
On the international front, geopolitical dynamics remain a significant driver of gold prices. Recent Ukrainian attacks on tankers linked to Russian trade and the escalation of conflict in the Donbas region have kept global tensions elevated. These events reinforce demand for safe-haven assets but have not been enough to trigger sustained bullish momentum, as markets simultaneously show increased appetite for risk.
Indeed, the rebound in global stock indices and improved business confidence have partially reduced speculative demand for gold. Even so, investors remain cautious, aware that geopolitical risks could escalate at any moment and shift market sentiment. Oil price volatility, affected by the attacks above, also indirectly influences gold’s behavior by heightening perceptions of systemic risk.
Recent U.S. economic data adds another layer of complexity to the outlook. Indicators such as jobless claims, the trade balance, and personal consumption expenditures could shift expectations for 2026 monetary policy, thereby affecting gold’s performance. A more pronounced slowdown in the labor market or signs of weakness in manufacturing activity would strengthen bets on additional rate cuts, which would directly benefit gold.
From a technical standpoint, XAU/USD is trading within a narrow range, with notable resistance near recent highs and solid support at key psychological levels. The lack of a clear catalyst has kept the price moving sideways, without a defined trend, though indicators such as the RSI suggest neutral conditions that leave room for movement in either direction. The recent drop in trading volume also suggests that
traders are awaiting a macroeconomic trigger before taking more aggressive positions.
Fund managers maintain a balanced stance, gradually increasing allocations to physical gold while reducing exposure to short-term derivatives. This strategy reflects the view that, although gold may not post an explosive rally in the near term, its role as a structural hedge against economic and political uncertainty remains essential.
In conclusion, gold is in a consolidation zone shaped by opposing forces: a weakened dollar driven by expectations of rate cuts, and a global market where risk appetite coexists with lingering geopolitical tensions. While current factors limit immediate upside potential, they also significantly reduce the likelihood of a deep correction. In this context, XAU/USD retains a neutral-to-bullish bias as markets await new economic data and geopolitical developments that will determine its next direction.