Gold is currently taking a brief respite just below its all-time peak. However, this market calm may be deceptive. Investors are already positioning for the upcoming Federal Reserve interest rate decision. With disappointing labor market data significantly boosting the odds of a policy shift, the critical question emerges: could the Fed’s next move provide the catalyst for a decisive breakout to new highs?
A Weakening Dollar Fuels the Rally
The prospect of imminent interest rate cuts is exerting substantial pressure on the US dollar. The Dollar Index is hovering near its lowest level since late October. This currency weakness acts as a direct catalyst for gold, making the dollar-denominated metal cheaper for international buyers and simultaneously reducing the opportunity cost of holding the non-yielding asset.
Labor Data Forces the Fed’s Hand
Recent economic indicators from the United States, which point to a noticeable cooling, have been the primary fuel for the metal’s latest rally. The ADP employment report for November showed an unexpected decline of 32,000 jobs in the private sector—the most significant drop in over two and a half years. These figures are complemented by Challenger data, which documented 71,000 layoffs in November alone.
This labor market softness is compelling the Federal Reserve to act. Concurrently, the Core PCE price index, the central bank’s preferred inflation gauge, shows a moderately declining annual rate of 2.8%. Consequently, market participants see few remaining obstacles to a monetary policy easing at the FOMC meeting on December 9 and 10.
Should investors sell immediately? Or is it worth buying Gold?
- Rate Cut Probability: Markets are pricing in an 87% chance of a cut in December.
- Year-to-Date Performance: Gold has registered a gain of over 60% so far this year.
- Price Level: Closing at $4,227.70 on Friday, the precious metal trades less than 1% below its 52-week high.
- Labor Market Context: Unexpected job losses in the US private sector (ADP data).
Scenarios Extending into 2026
Analysts are already looking beyond the year-end. The World Gold Council outlines further potential in its 2026 outlook. Even in a scenario of moderate economic slowdown, experts believe price gains of 5% to 15% are possible. Should a pronounced recession occur, accompanied by geopolitical tensions, prices could even advance by up to 30%. This outlook is supported by sustained central bank purchases, particularly from emerging markets seeking to further diversify their reserves.
Silver, often considered gold’s sibling, is also benefiting from this environment. Driven by structural supply deficits and industrial demand from the energy transition, it recently reached a new all-time high above $59.
The immediate directional decision, however, will be made next week. If the US central bank confirms market expectations on December 10 with a 25-basis-point rate cut, the path would be clear—both technically and fundamentally—for a test of the record high of $4,265 marked just on December 1.
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