Gold prices remained largely steady in early December before climbing later in the month, supported by shifts in US monetary policy expectations and heightened geopolitical uncertainty. The rally followed a Federal Reserve meeting that was perceived as less hawkish than markets had feared, with additional support coming from comments by Federal Reserve Governor Christopher Waller suggesting the possibility of further interest rate cuts.
Geopolitical developments also played a role. Tensions linked to Venezuela around the Christmas period added to gold’s appeal as a safe-haven asset. By the end of December, the precious metal had recorded strong gains, continuing a trend seen throughout much of the year.
However, momentum faltered in the current week after a sharp sell-off in silver sent ripples across the precious metals complex. The decline was driven in part by higher margin requirements, prompting some global investors to unwind positions. The move highlighted the sensitivity of metals markets to shifts in trading conditions, even when broader fundamentals remain supportive.
Analysts argue that longer-term drivers for gold remain firmly in place. Global defence-led fiscal spending is rising, while governments across major economies are increasingly prioritising fiscal flexibility over strict inflation control. This so-called “fiscal dominance” environment may keep interest rates lower than traditional inflation-targeting frameworks would imply, easing government borrowing costs.
Such dynamics are not limited to the United States. Political uncertainty in Europe and Japan, combined with ongoing geopolitical tensions, has reduced the likelihood of swift global stabilisation. In parallel, the use of foreign exchange reserves as geopolitical tools has encouraged central banks to continue increasing gold holdings, reinforcing demand even as physical consumption softens.
Against this backdrop, analysts see a move towards $5,000 per troy ounce as a plausible next milestone for gold prices, following the achievement of a $4,000 target earlier this year. Some caution that history shows gold rallies driven by fiscal and geopolitical forces can extend far beyond initial expectations, particularly during prolonged periods of global uncertainty.
