Spot gold is moving in a narrow range, as the market takes a brief breather ahead of the Federal Reserve policy meeting. Investors are holding their breath for the latest remarks from Fed Chair Jerome Powell, while geopolitical tensions, fluctuations in the US dollar, and sudden events such as the earthquake in Japan are all quietly influencing gold’s price action.

Although gold prices are under pressure in the short term, the underlying fundamentals remain strong. Continued central bank gold purchases and safe-haven demand are expected to keep pushing gold higher, with some institutions even forecasting that by the first quarter of 2026, gold prices could reach the milestone of $5,000 per ounce.

The market broadly expects the Federal Reserve to announce a 25-basis-point rate cut on Wednesday, with the probability as high as 90%, sharply up from 66% in November. This expectation stems from the Fed officials’ recently more dovish tone, but this could turn out to be a hawkish cut. If investors therefore lower their expectations for two to three rate cuts next year, the US dollar may find support, thereby exerting short-term pressure on gold.

Gold’s fundamentals remain robust, and ongoing central bank buying will provide long-term support. This means that even if gold prices dip slightly in the short term, investors should not become overly pessimistic, but rather view the move as an opportunity to build positions. Morgan Stanley holds a similar view, believing that a weaker dollar and strong ETF inflows will further amplify gold’s upside potential.

Beyond monetary policy, geopolitical risks are quietly injecting new momentum into gold. At a sensitive moment when Kyiv is under US pressure to reach a peace deal with Russia, the leaders of France, Germany and the United Kingdom met Ukrainian President Zelensky in London and expressed strong support, calling this a critical moment for Kyiv. This stance not only reinforces the unity of the Western bloc, but also underscores the protracted nature of the Russia-Ukraine conflict.

Historically, geopolitical tensions have often triggered flows of safe-haven capital into the gold market. This latest show of high-profile support from European leaders may further heighten market concerns over global stability and strengthen gold’s role as a safe harbor asset.

Market Analysis:

On the 4-hour chart, gold is pulling back within a choppy range, with the MACD lines and histogram converging below the zero line. Overall, rising yields typically compress gold’s appeal, as non-interest-bearing gold faces higher opportunity costs in a high-rate environment. However, given the clear divergence within the Federal Reserve, this pressure may prove short-lived, and gold’s inflation-hedging properties are likely to come back into focus.