Gold prices hovered close to their highest level in more than a week on Wednesday, supported by growing expectations that the U.S. Federal Reserve will reduce interest rates next month. With lower rates typically boosting the appeal of non-yielding bullion, traders shifted focus away from currency movements and towards monetary policy cues.
Spot gold climbs as investors eye December policy shift
Spot gold rose 0.8% to $4,162.99 per ounce at 01:55 p.m. ET (18:55 GMT), touching its strongest level since 14 November earlier in the session. U.S. gold futures for December delivery settled 0.6% higher at $4,165.20 per ounce.
Analysts attributed the rally to heightened speculation that the Fed will move ahead with a rate cut in December. Edward Meir of Marex said the market narrative had tilted firmly towards a near-term reduction in borrowing costs.
“The focus has shifted away from the dollar and towards a decrease in interest rates in December,” he noted, adding that gold’s rise despite a steady dollar index underscored the bullish sentiment.
Market reacts to Fed leadership discussions
Investors were also responding to discussions surrounding potential nominees for the next Federal Reserve chair. According to Meir, speculation about the front runner — economist Kevin Hassett — added further support to bullion, since Hassett has publicly argued in favour of lower interest rates.
Gold typically performs well in a low interest rate environment as it carries no yield, making it more attractive when borrowing costs decline.
Rate cut probability jumps sharply
According to the CME FedWatch Tool, traders now assign an 85% probability to a December rate cut, a sharp rise from 30% just a week earlier. Recent dovish remarks from multiple Fed policymakers have strengthened the case for easing.
These expectations were reinforced by fresh U.S. data. Weekly unemployment claims fell, suggesting layoffs remain subdued. However, the labour market continues to struggle to generate adequate employment opportunities amid economic uncertainty. U.S. consumer confidence also weakened in November as households grew more cautious about job prospects and their financial stability.
Deutsche Bank raises 2026 gold forecast
The medium-term outlook for gold remains upbeat. Most major financial institutions expect prices to remain above $4,000 per ounce through 2026. In its latest revision, Deutsche Bank increased its 2026 gold forecast to $4,450 per ounce, up from its previous estimate of $4,000. The bank cited consistent central bank purchases and stabilising investor flows as key drivers of long-term strength.
Market analysts say persistent geopolitical tensions, elevated sovereign debt levels, and expectations of prolonged monetary easing cycles globally could sustain strong demand for the metal in the coming years.
Conclusion
With traders heavily betting on a December rate cut and long-term projections turning even more optimistic, gold continues to benefit from a favourable macroeconomic backdrop. If central banks maintain an accommodative stance and global uncertainty persists, bullion is likely to remain an attractive haven for investors well into 2026.