Gold is retesting the all-time high levels reached about 60 days back. On October 20, gold had an all-time high closing of $4,359.40 and made an all-time intraday high of $4,398.
On December 17, gold is trading at $4,337 as investors remained optimistic about the possibility of further Federal Reserve easing in 2026.
US Fed Rate Cut
The job market is cracking and the US Fed may have to support the economy by cutting rates. Analysts are forecasting up to two interest rate cuts in 2026. The unemployment rate unexpectedly increased to 4.6% in November, the highest since 2021, and wage growth slowed to its worst pace in almost two years as the US labor market continued to weaken.
Gold gets support in a falling interest rate scenario. Bad news for the economy works to gold’s advantage. To support the economy, US Fed has to resort to rate cuts, allowing more liquidity into the system. As gold is a non-yielding asset, the opportunity cost of holding gold decreases when rates fall.
November’s CPI data
Markets now anticipate November’s CPI data, which is coming on Thursday, followed by PCE readings on Friday, for more insight into inflation pressures.
Meanwhile, geopolitical risks revived as President Donald Trump ordered a total and complete embargo of sanctioned Venezuelan oil vessels following last week’s seizure and a US military buildup, somewhat offsetting risk reductions linked to progress in Russia-Ukraine peace negotiations.