Gold Surges as Fed Pivot Expectations Intensify

Gold prices have rocketed to a two-week peak as mounting anticipation of a Federal Reserve policy reversal grips the markets. The catalyst behind this powerful rally appears to be a dramatic repricing of interest rate expectations, with traders now assigning an 80% probability to a December rate cut. This shift, combined with a softening US dollar, has created an ideal environment for the precious metal to thrive.

Market sentiment has undergone a significant transformation, with the CME FedWatch Tool indicating the likelihood of a 25-basis-point cut in December surged by a substantial 30 percentage points within just one week. This brings the current probability to 80%. The underlying calculation is straightforward: declining real interest rates substantially reduce the opportunity cost of holding non-yielding gold.

Spot gold climbed 0.8% to $4,162.90 per ounce, reaching its highest level since mid-November. Meanwhile, US gold futures advanced 0.5% to $4,160.10. The weaker US Dollar Index has further supported this move by making dollar-priced gold less expensive for investors using other currencies.

Leadership Speculation Adds Another Layer

Market participants are closely watching speculation that Kevin Hassett might succeed Jerome Powell as Fed Chair. Hassett is perceived as an advocate for lower interest rates, a scenario that would create what many consider a dream setup for gold. As an asset that provides no yield, gold becomes significantly more attractive when rates fall.

Broader Precious Metals Complex Joins the Advance

The bullish momentum has spread across the entire precious metals sector. Silver demonstrated particular strength, jumping 2.2% to $52.52 per ounce—a move that often signals both industrial confidence and growing inflation concerns. Platinum gained 0.8% to $1,565.20, while palladium added 0.6% to $1,405.76.

Should investors sell immediately? Or is it worth buying Gold?

Central Banks Provide Fundamental Support

Beyond speculative interest, fundamental demand remains robust. Goldman Sachs estimates that central bank purchases reached 64 tonnes in September, triple the meager 21 tonnes recorded in August. The investment bank anticipates these substantial purchases continued through November. This sustained buying reflects a broader diversification strategy as institutions seek protection against geopolitical and financial instability.

Key Drivers Behind Gold's Strength:

• Weakening US currency facilitates international purchases
• Falling real returns enhance gold's appeal versus yield-bearing assets
• Persistent geopolitical tensions boost safe-haven demand
• Record-level institutional accumulation continues

Technical Outlook and Price Trajectory

From a technical perspective, gold has firmly established itself above the $4,150 level. The next immediate price target sits at $4,210, while Goldman Sachs maintains a more ambitious medium-term forecast of $4,900 by the end of 2026. With the Relative Strength Index reading at 57.7, the bullish momentum appears sustainable without showing signs of being overextended.

Should the Federal Reserve maintain its easing trajectory and the dollar continue to weaken, gold's upward journey seems poised to continue. The question for many market observers is no longer if further milestones will be reached, but rather when the next resistance level will be breached.