Gold Hits All-Time High, Propelled by US Rate-Cut Hopes, Safe-Haven Appeal
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- Last Updated: 22 Dec 2025 at 1:53 PM IST
Gold hit a record-high price of $4,383.73 per ounce due to expectations of more US Federal Reserve rate cuts following last week’s quarter-point decrease, along with continued strong safe-haven demand amid ongoing trade and geopolitical tensions. Reflecting this global strength, gold prices in the domestic futures market on MCX also touched an all-time high on Monday (December 22), reaching Rs 135,550 per 10 grams of 24-carat purity.
Coupled with the weakening of the dollar, gold becomes even more attractive for foreign investors. But the question remains: as gold does not pay interest and falling rates increase demand for gold as an alternative to interest-bearing assets, how is this leading to new patterns in global investment strategies?
How Did Gold's Rally Gain Momentum?
The market has responded positively to the anticipated Federal Reserve rate cuts, which are expected to take place in 2026.
As a result of these expected changes, the costs associated with holding gold versus holding cash (or bonds) will continue to decrease. Traders were keenly watching the Fed's next move in response to last week's news regarding inflation and the impact on future monetary easing.
In addition, as the value of the US dollar declines, international investors will find themselves being able to buy more gold. These factors have fuelled significant increases in gold purchases by individual and institutional investors outside the US.
Demand for gold as a risk-off asset has increased due to continued global tension and trade disputes. Furthermore, the ongoing purchase of gold by central banks has created an additional demand base, which has protected gold prices from short-term market fluctuations.
The combination of these factors sets up a strong position for gold entering the end of this year, and it has provided additional technical breakout signals in support of long-term bullish speculative and institutional allocation.
Safe-Haven Strength Amid Tensions
During periods of uncertainty, including global instability caused by regional conflict, trade tariffs, and other disruptive forces, gold has consistently played the role of safe haven. Investors typically gravitate toward the security that gold provides when stock markets become volatile and foreign currencies fluctuate frequently.
The increase of 67% over the past year reflects this trend, as gold has outpaced almost every other investment vehicle during this time when uncertainty is at its highest.
In addition to retail investor activity, the recent surge in demand for gold from institutional investors and ETFs has created a broad-based foundation of support. The current downward trend of interest rates has decreased the total amount of return to gold investors, thereby encouraging them to invest in more diversified portfolios through gold.
Rate Outlook and Dollar Dynamics
Not only gold, but the price of silver also reached record levels this week. The most-traded futures contract for silver is up 131% this year, hitting 14 record highs. Both precious metals are on pace for their largest annual gains since 1979, as they are considered safe-haven investments amid ongoing global uncertainty.
The Federal Reserve is expected to continue providing easy accommodation through 2026. Therefore, gold prices are currently influenced by expectations for continued Fed monetary policies. With respect to this, the Fed is trying to balance the demand for economic growth against the need to contain inflation.
The result of this balance will be a weaker U.S. dollar and, in turn, higher gold prices, as the cost of buying gold will decline for the world’s largest gold consumers, China and India, making them more likely to increase purchases. This confluence of circumstances is likely to create growing upward momentum in gold prices; however, the potential for profit-taking at record levels remains a threat.
But the question remains: will these diversification strategies of central banks provide gold with additional momentum as they view gold as a stabilising reserve asset?
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