Gold Price Analysis: XAU/USD Extends Rally Toward $4,350 as Fed Cuts Loom and Geopolitical Tensions Persist

Gold surges to approximately $4,345 in early Asian trading Friday, marking continued momentum following a historic 2025 performance.

Gold finished 2025 with an exceptional performance, posting annual gains near 65%—the strongest year for the precious metal since 1979. This remarkable ascent reflects a combination of macroeconomic expectations and risk-off sentiment permeating global markets.

Fed Rate Cut Outlook Remains Central Driver

The outlook for additional Federal Reserve interest rate cuts in 2026 continues to anchor Gold’s upside trajectory. In December, the Fed reduced rates by 25 basis points, moving the federal funds rate to the 3.50%–3.75% range. Fed officials remain divided on the path forward, with December meeting minutes revealing mixed signals on the timing and magnitude of future cuts. Nonetheless, most policymakers acknowledged that further reductions may be warranted if inflation continues declining.

From an investment perspective, lower interest rates erode the opportunity cost of holding non-yielding assets like Gold. When cash rates fall, precious metals become relatively more attractive to yield-seeking investors seeking portfolio diversification.

Geopolitical Risks Amplify Safe-Haven Demand

Beyond monetary policy, escalating geopolitical tensions continue supporting Gold’s safe-haven status. The Israel-Iran conflict and mounting US-Venezuela tensions create an environment where investors actively seek assets capable of preserving capital amid uncertainty. Gold, with its long-established role as a hedge against political instability, naturally attracts risk-averse capital flows during such periods.

Profit-Taking and Margin Pressures May Curb Gains

However, potential headwinds exist. After such a powerful rally, traders may opt to lock in profits or rebalance portfolios, which could introduce selling pressure. Additionally, the CME Group recently elevated margin requirements on Gold and Silver futures contracts. These higher collateral demands compel traders to commit additional capital to maintain positions, potentially discouraging some participants and moderating upside momentum for the precious metal.

Looking Ahead

Gold’s path forward will likely hinge on the interplay between Fed policy signals, geopolitical developments, and profit-taking cycles. While the fundamental backdrop remains supportive, technical profit-taking and increased trading costs may introduce near-term consolidation.