Gold strengthens again, continuing its upward trend since the beginning of the year! Gold prices surged to a new high of $4378

Breaking news from the Asian trading session—spot gold continued to rise during Friday, January 2nd, midday trading hours, with the latest quote approaching $4,378 per ounce, nearly a $60 intraday gain. This rally extends gold’s strong performance throughout 2025, with an annual increase of about 65%, marking the largest annual gain since 1979, highlighting the strong appeal of precious metals over the past year.

Three Major Factors Supporting Gold Price Rise

Expectations of Rate Cuts as the Main Driver

The Federal Reserve held a policy meeting in December, announcing a 25 basis point rate cut, lowering the federal funds rate target range to 3.50%-3.75%. According to the FOMC minutes from December 9-10, most Fed officials believe that as long as inflation continues downward, further easing of monetary policy is appropriate. The market is therefore optimistic about rate cuts in 2026.

In a low-interest-rate environment, the opportunity cost of holding gold decreases, providing direct support to non-yielding precious metals. The inverse relationship between gold prices and real interest rates is fully reflected in this rally.

Geopolitical Risks Boost Safe-Haven Demand

Tensions in the Middle East remain high, with no signs of easing in the Israel-Iran conflict. Relations between the US and Venezuela are also highly strained. When global uncertainties increase, traders tend to allocate assets like gold to hedge risks. Continued buying by central banks and institutional investors further provides a bottom support for precious metal prices.

Volatility from Margin Adjustments

The CME Group recently increased margin requirements for gold, silver, and other precious metal futures. This move requires traders to commit more capital to cover contract risks, which may trigger short-term market volatility but also indicates rising market enthusiasm for gold.

Short-term Risks and Technical Outlook

Chart analysis shows that gold remains at high levels, with the overall trend still positive. The $4,300 per ounce level has gradually become an important support zone. If this level holds, gold prices may continue to extend upward.

However, technical indicators are already at relatively high levels, suggesting potential short-term corrections or consolidations. Some traders may choose to take profits at high levels, and the increased margin requirements on CME could force high-leverage longs to reduce positions, further amplifying price fluctuations.

Additionally, stronger-than-expected US economic data or a rebound in the dollar could suppress gold prices.

Outlook and Trading Strategy

From a macro perspective, the Fed’s monetary policy path remains the key factor influencing long-term gold trends. While the FOMC minutes show some divergence among officials regarding the pace of rate cuts, the overall tone remains accommodative, which is beneficial for lowering real US Treasury yields and providing structural support for gold.

In the context of sustained safe-haven demand, the medium- to long-term outlook for gold remains optimistic. Market expectations of further rate cuts and ongoing geopolitical risks will continue to support gold’s allocation value.

However, traders should be cautious of high-level volatility. The best short-term strategy is to buy on dips, waiting for pullbacks to enter rather than chasing highs blindly. Close attention should be paid to CME margin changes, US economic data, and dollar movements, as these factors could cause short-term disruptions in gold prices.