Gold prices approach the 4500 mark: Weak US dollar and central bank policies drive the next wave of gains

Technical Support Strengthens Bullish Momentum

Gold has entered a new upward cycle since early November, with a gain of over 14% in just a few weeks. In the most recent trading session, the price touched $4,497, just one step away from the round number of $4,500. The daily chart shows a series of higher highs, indicating that the upward trend remains intact. However, the RSI indicator has been in overbought territory for an extended period, suggesting that short-term consolidation or profit-taking risks are gradually increasing.

Weak US Dollar and Strong Yen Drive Gold Prices Higher

The US dollar is testing the critical support level at 98.0, and after Japanese Finance Minister Shunichi Katayama issued the most severe warning to speculators to date, the yen has shown a clear strengthening trend. When the yen rose to around 1320 yen per US dollar, it reflected ongoing pressure on the dollar. If the dollar breaks below 98.0, further downside could open up, providing bullish support for dollar-denominated commodities like gold.

Federal Reserve Policy Expectations Reshape Market Landscape

Federal Reserve Governor Mural stated on Monday that if interest rate cuts do not continue next year, the risk of recession will increase, and unemployment may rise. The market expects the Fed to pause rate hikes in January 2026, followed by cuts of 25 basis points in March and June, ultimately guiding the federal funds rate to a range of 3% to 3.25%.

Inflation Data Sends Positive Signals

US November CPI increased by 2.7% year-over-year, with core inflation rising to 2.6%, both below market expectations of 3.1% and 3%. This lower-than-expected inflation provides a basis for the Fed to implement two rate cuts next year and eases market concerns about persistent high prices. Economic data such as October durable goods orders, November industrial production, and Q3 core PCE inflation awaiting release will further shed light on the US outlook.

Geopolitical Risks Continue to Boost Safe-Haven Assets

Progress in Ukraine-US peace talks remains limited, and US sanctions on Venezuelan oil tankers have escalated, with geopolitical uncertainties continuing to support safe-haven assets like gold. Investors tend to increase gold holdings during tense situations.

2026 Outlook: Fiscal Deficit Becomes Focus

Looking ahead to next year, the US fiscal deficit is expected to return to the investor spotlight. Gold is increasingly viewed as a hedge against national debt risks and dollar depreciation. As long-term government bond yields rise in major countries, there is a possibility that the Fed may cut rates more than expected or adopt unconventional measures such as quantitative easing or yield curve control, all of which could boost gold’s bullish prospects.

JPMorgan predicts that, amid tariff uncertainties and strong demand from ETFs and central banks worldwide, gold prices could rise above $4,000 in 2025 to reach new record highs. The addition of new demand from Chinese insurance institutions and the cryptocurrency community may further help gold reach $5,055 by the end of 2026.

Short-term Strategy Recommendations

With the Christmas holiday approaching, market liquidity may thin out, leading to increased volatility. Investors should be cautious of profit-taking risks after gold’s recent rapid rise and closely monitor the $4,450 support/resistance level. As long as gold remains above $4,450, a bullish outlook is maintained; if it falls below this level, there is a need to watch for potential transition into a high-level consolidation zone.