Gold prices reached a seven-week high, nearing $4,350 due to expected interest rate cuts by the US Federal Reserve. Reduced interest rates may lower the cost of holding gold, benefitting the non-yielding asset, while global uncertainty increases its appeal as a safe haven. However, hawkish comments from Fed officials might increase the US Dollar’s value, impacting gold prices.
Traders are observing speeches from key Fed officials and upcoming US employment reports for October and November. These reports, which include Nonfarm Payrolls and the Unemployment Rate, could provide insights into labour market conditions and affect forecasts for the Fed’s January meeting. Recent events include a mass shooting in Sydney, which killed at least 16 people, described as a “targeted attack” by Australia’s Prime Minister.
The Federal Reserve’s Decision
The Federal Reserve made a quarter-point rate cut, establishing a target range of 3.50% to 3.75%. Market projections suggest a 76% chance of the Fed maintaining steady rates by January 2026 using the CME FedWatch tool. Gold maintains a positive outlook, with its price supported above the 100-day Exponential Moving Average and a bullish 14-day Relative Strength Index. Potential resistance levels are anticipated around $4,355, with initial support observed at $4,257.
Given the Federal Reserve’s recent rate cut in December 2025, we see gold reacting positively to the lower interest rate environment. However, with Fed Chair Powell suggesting a pause, the path forward is not entirely clear. The recent tragic event in Sydney is also increasing gold’s appeal as a safe-haven asset, adding to the upward pressure.
The primary driver for gold remains the outlook for interest rates, as lower rates decrease the opportunity cost of holding the non-yielding metal. We’ve seen this play out historically, such as during the rate-cutting cycle of 2019 when gold rallied over 20%. The strong buying from central banks, which added a record 1,136 tonnes in 2022 and have continued aggressive purchases through 2025, provides a strong underlying support for the price.
US Employment Report Forecast
This week, all eyes are on the upcoming US employment report for November. Economists are forecasting Nonfarm Payrolls to come in around 170,000, and a significant deviation from this could spark major volatility. A much weaker number would likely solidify bets for further rate cuts in 2026, pushing gold toward its all-time high of $4,381, while a surprisingly strong report could boost the dollar and trigger a sharp pullback.
For derivative traders, this environment suggests playing the expected volatility around Tuesday’s jobs data. Buying options, such as calls to target the $4,381 resistance or puts with a strike near the $4,257 support level, could be a prudent strategy to capitalize on a large price swing. The widening Bollinger Bands noted in the technical analysis support the idea that a significant move is becoming more likely.
However, we must also consider the risk of a hawkish surprise from the Fed in the new year. The latest Consumer Price Index (CPI) reading for November 2025 showed headline inflation at 3.1%, which is still well above the Fed’s 2% target. This persistent inflation is why markets are pricing in a 76% chance of a rate hold in January 2026, which could cap gold’s rally in the immediate term.
Therefore, any dips in the price of gold, especially following a strong economic data point, might be viewed as a buying opportunity for longer-term positions. The overall trend appears constructive as we move into 2026, with the Fed having completed its 2025 cutting cycle. We can use pullbacks to establish positions that benefit from the broader shift toward looser monetary policy.
