Gold (XAU/USD) extends its bullish momentum on Friday, trading near $4,375 during the early European session. The precious metal continues to benefit from growing expectations of further interest rate cuts by the US Federal Reserve (Fed), alongside persistent safe-haven demand amid elevated geopolitical tensions.
With markets still operating in relatively thin liquidity conditions, investor focus is gradually shifting toward upcoming US macroeconomic releases for clearer guidance on the interest rate outlook.
Traders are particularly attentive to US labor market data, with the December Nonfarm Payrolls (NFP) report due next week expected to play a key role in shaping near-term rate expectations. Any signs of cooling employment conditions could reinforce the case for additional monetary easing and further support Gold prices.
Fed policy outlook underpins gold rally
The Fed lowered interest rates by 25 basis points at its December policy meeting, bringing the federal funds rate target range to 3.50%–3.75%. According to the latest Federal Open Market Committee (FOMC) Minutes, most policymakers view additional rate cuts as appropriate over time, provided inflation continues to trend lower. However, officials remain divided over both the timing and the overall extent of future easing.
Lower interest rates tend to reduce the opportunity cost of holding non-yielding assets such as Gold, strengthening its appeal in diversified portfolios and helping sustain the current rally.
Geopolitical tensions reinforce safe-haven flows
Geopolitical developments are adding another layer of support for the yellow metal. Gold continues to attract inflows as a traditional store of value during periods of heightened uncertainty.
According to Reuters, Russia recently accused Ukraine of launching a drone attack on the Russian presidential residence in northern Russia, prompting Moscow to reassess its position in ongoing peace negotiations. Ukraine has rejected these claims, with its foreign minister suggesting that Moscow is seeking false justifications for further military action.
Such tensions have kept investors cautious, reinforcing demand for defensive assets, including Gold.
Profit-taking and higher margins may cap upside
Despite the strong bullish tone, upside risks may become more balanced in the near term. Some investors could opt to lock in profits or rebalance portfolios following Gold’s sharp advance to record territory. In addition, the Chicago Mercantile Exchange (CME) Group has raised margin requirements for Gold, Silver, and other metals. These changes require traders to post more collateral to maintain positions, a move that can dampen speculative activity and potentially limit short-term gains.
While the broader fundamental backdrop remains supportive, these factors suggest that volatility could increase as markets reassess positioning in the days ahead.
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