Although gold prices have yet to return to the historical peak of over 4,360 USD per ounce seen in October, current levels are already close to their fair value.
This is not just the result of market volatility, but an inevitable outcome driven by the broader economic environment. With the Federal Reserve’s rate-cut cycle beginning and the U.S. dollar weakening, gold will continue to build solid support levels. Investors who keep waiting for a major pullback may very well miss out on a good opportunity.
After a brief moment of glory in October, the gold market did not experience the sharp correction some investors had anticipated. Instead, it found firm support above 4,000 USD per ounce and gradually consolidated its footing around the 4,200 USD area.
As global economic uncertainty surges like a rising tide, volatility in gold is inevitable. However, after each breakout, it consistently manages to establish a higher support level. This is no coincidence, but rather the natural function of gold’s role as a safe-haven asset. For example, in October, gold once broke through the 4,360 USD mark, then saw a modest pullback due to profit-taking. Selling pressure, however, remained limited and did not trigger panic liquidation. After a brief consolidation, prices regained their footing, reflecting that market confidence in gold has not been shaken.
What investors are seeing is a healthy correction, not a collapse. Today’s price level is precisely where gold should be in a world characterized by rising government debt and falling interest rates. This positioning is not only driven by short-term market sentiment, but is also supported by long-term economic trends.
Investors should no longer pin their hopes on a sharp pullback, as signs of economic weakness are becoming increasingly evident. This will force the Federal Reserve to start cutting rates next week and maintain this policy direction throughout 2026. Rate cuts will directly depress both nominal and real bond yields while weakening the U.S. dollar, creating an ideal environment for gold.
Looking back at recent developments, the market once sharply lowered its expectations for a December rate cut last month. However, a series of disappointing economic data quickly reversed this, and the market-implied probability of a rate cut has now climbed to nearly 90%.
Market Analysis:
On the 4-hour chart, gold is moving in a choppy consolidation, with the MACD lines and histogram converging near the zero line. While next week’s Federal Reserve monetary policy meeting is important, an even more critical source of support comes from uncertainty around the Fed’s leadership. Current Chair Jerome Powell’s term will end in May next year, and it remains highly uncertain who will take over. Any possibility of political pressure interfering with central bank independence would significantly boost demand for gold.
