By Rania Gule, Senior Market Analyst at XS.com – MENA
Gold is experiencing a notable rally that has lifted it to its highest levels in nearly seven weeks, a development I see as a natural reflection of the convergence of two key factors that have long driven the price of the yellow metal: expectations of U.S. interest rate cuts and rising safe-haven flows amid a global environment marked by elevated uncertainty. In my view, this move cannot be dismissed as a mere technical fluctuation; rather, it represents a gradual repricing of global economic risks and U.S. monetary policy simultaneously.
Gold attracted some buyers at the start of the European session on Monday, which I interpret as a sign of renewed hedging appetite among institutional investors, particularly with major economic events approaching. Early European trading often reflects broader market sentiment ahead of U.S. data releases, and in this case, participants appear to be positioning in gold preemptively to guard against potential surprises. In my opinion, this behavior reflects calculated caution rather than speculative exuberance, lending greater credibility to the current upswing.
The primary support for gold undoubtedly stems from expectations that the Federal Reserve will cut interest rates next year. Lower interest rates reduce the opportunity cost of holding gold—an asset that does not generate yield—making it more attractive relative to bonds or fixed-income instruments. In my assessment, markets have begun to anticipate a gradual easing cycle, even as the Fed remains careful to maintain a cautious tone in its official communications. This divergence between official rhetoric and market expectations is what fuels volatility and supports gold in the short to medium term.
At the same time, the impact of hawkish remarks from some Federal Reserve officials last week cannot be ignored, as they partially curbed gold’s advance by supporting the U.S. dollar. Historically, a stronger dollar exerts pressure on dollar-denominated commodities, including gold. However, I believe this pressure may prove temporary, as markets have become more responsive to hard data than to verbal guidance. Investors recognize that hawkish language unsupported by strong labor market or inflation data is unlikely to alter the broader trajectory of monetary policy expectations.
Attention is now turning to speeches by Fed officials such as Stephen Miran and New York Fed President John Williams, but in my view, the greater impact will come from the U.S. nonfarm payrolls data for October and November, due on Tuesday. Alongside average hourly earnings and the unemployment rate, these figures will offer a clearer picture of the resilience of the U.S. labor market. If the data point to a meaningful slowdown, I believe this would reinforce bets on rate cuts and push gold to test higher levels. Conversely, stronger-than-expected data could trigger a limited correction, though it would not, in my view, alter the underlying bullish trend.
Recent geopolitical events also play a role that should not be underestimated. Reports of the mass shooting in Sydney and the political and social tensions surrounding it have once again highlighted gold’s role as a safe haven during periods of instability. From my experience in monitoring markets, such events rarely have an immediate or lasting impact on their own, but they accumulate alongside other factors to strengthen demand for safe-haven assets, particularly during times of fragile global confidence.
The Federal Reserve’s recent decision to cut interest rates for the third time this year, coupled with Jerome Powell’s remarks that the central bank is now in a “comfortable position,” reflects a transitional phase in monetary policy. In my view, this comfort suggests that the Fed has room to maneuver while implicitly acknowledging that the peak of monetary tightening is now behind us. Markets, by their forward-looking nature, quickly absorb such signals and reprice assets accordingly, with gold among the key beneficiaries of this shift.
Market expectations pointing to a high probability of keeping interest rates unchanged in January do not, in my analysis, conflict with a positive outlook for gold. Stability itself, following a prolonged period of rate hikes and tightening, acts as an indirect support for the precious metal. What matters for gold is not only actual rate cuts, but the end of the tightening phase and the onset of a wait-and-see environment—conditions that have historically been favorable for the metal.
In light of all these factors, I expect gold to maintain its positive outlook in the period ahead, with the potential to reach higher levels should jobs data come in below expectations or geopolitical risks intensify. That said, investors should remain cautious of short-term volatility, as the path forward is unlikely to be linear. From my perspective, gold’s rise is not driven by a single factor, but by a complex mix of monetary policy dynamics, economic data, and global risks—once again placing it at the forefront of the financial landscape as a strategic hedging tool rather than merely a speculative asset.