Gold prices surged to a new high of $4,285.50 per troy ounce on Monday, December 11, following the U.S. Federal Reserve's decision to cut interest rates. The precious metal climbed sharply by $89.10, or 2.12%, pushing bullion into a significant breakout. This move came after the Fed reduced its key interest rate by 25 basis points earlier in the week.[nasdaq]
Fed Cuts Rates, Weakens Dollar
The Federal Reserve's rate cut, announced on Wednesday, December 10, lowered the target range to 3.50%-3.75%. This marked the third consecutive quarter-point reduction this year. Lower interest rates typically boost gold's appeal because the metal does not offer any yield. When other investments like bonds become less attractive due to lower returns, investors often turn to gold as a store of value.[nasdaq+7]
The Fed's decision, coupled with an unexpected bond-buying program, also weakened the U.S. dollar. A softer dollar makes gold, which is priced in U.S. currency, more affordable for international buyers, further driving demand. Spot gold rose 0.7% to $4,236.57 per ounce, while U.S. gold futures for February delivery settled slightly lower at $4,224.70.[fxstreet+4]
Hareesh V, Head of Commodity Research at Geojit Investments Ltd., stated, "With bullion already at record highs, this policy shift adds momentum to the rally, as investors seek safe-haven assets amid economic uncertainty and inflationary pressures."[ndtvprofit]
Economic Signals and Geopolitical Tensions Support Gold
Beyond the rate cut, other economic data contributed to gold's rally. U.S. Labor Department data showed that initial jobless claims climbed by 44,000 to 236,000 for the period ending December 6. This weaker-than-expected jobs data weighed on the dollar and reinforced safe-haven demand for gold. Continuing jobless claims, however, declined.[nasdaq+4]
Geopolitical concerns also continue to fuel interest in the yellow metal. Ongoing geopolitical risks, including Ukraine negotiations and global tariff disputes, are driving safe-haven demand as investors seek stability. Central banks globally, particularly from emerging economies like China, India, and Turkey, have consistently increased their gold reserves, further supporting prices.[m+4]
Divided Fed Outlook and Future Projections
Despite the rate cut, the Federal Reserve signaled a cautious approach to future policy. Fed Chair Jerome Powell emphasized that further rate adjustments would depend on incoming economic data. The central bank's latest Summary of Economic Projections showed divisions among policymakers, with the forecast for 2026 hinting at just one more quarter-point cut.[nasdaq+4]
Some Fed members, like Governor Stephen Miran, favored a larger 50-basis-point cut, while others, including Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid, preferred to keep rates unchanged. This "wait-and-see" stance has left market participants uncertain about the exact trajectory of future policy.[nasdaq+1]
Analysts are now closely watching for a potential breakout above key resistance levels. Technical analysis suggests that if gold can achieve a daily close above $4,300, it could clear the path to challenge $4,350, and potentially even the record high of $4,381.[fxstreet+1]
Goldman Sachs analysts see "significant upside" to their 2026 gold price target of $4,900 per ounce. They point to structurally higher central bank purchases and the Federal Reserve's rate-cutting cycle as key drivers. Daan Struyven, head of oil research at Goldman Sachs, noted that even a small push into diversification from retail investors could significantly boost prices.[kitco]
The recent surge positions gold favorably as investors navigate a complex economic landscape marked by easing monetary policy, mixed labor market signals, and persistent global uncertainties.
