Gold’s Rally: Poised to Break New Records?

The precious metal is closing the week near its all-time peak and is on track for its strongest annual performance in over four decades. This surge is being fueled by unexpectedly soft U.S. inflation figures and mounting anticipation of imminent interest rate cuts from the Federal Reserve.

Key Data Points:
- Gold has advanced approximately 65 percent year-to-date.
- U.S. core inflation fell to 2.6 percent, its lowest level since March 2021.
- Goldman Sachs forecasts a price target of $4,900 per ounce by December 2026.
- Geopolitical tensions continue to bolster its safe-haven appeal.

Beyond cyclical factors, structural buyers are providing sustained support for gold prices. In a bullish analysis released Thursday, Goldman Sachs pointed to persistent central bank acquisitions and the cyclical tailwind from expected Fed easing as primary drivers. The bank projects gold will reach $4,900 per ounce by the end of 2026, representing a potential 14 percent gain from current levels around $4,370.

Recent activity from major institutional holders underscores this structural demand. China, for instance, added a further 5 tonnes to its reserves, bringing its total holdings to 2,303 tonnes. The United States maintains the world's largest stockpile at 8,133 tonnes, with Germany following at 3,350 tonnes.

Inflation Cool-Down Fuels Rate Cut Expectations

The catalyst for the latest upward move was November's U.S. consumer price data. Prices rose at an annual rate of 2.7 percent, notably slower than the 3.1 percent forecast. More significantly, core inflation dropped to 2.6 percent, marking its lowest point in nearly two years. This cooling trend has significantly increased market bets on a more accommodative monetary policy from the Fed.

Should investors sell immediately? Or is it worth buying Gold?

Financial markets are now pricing in a 25 percent probability of a rate reduction as early as January. By April, a cut is considered almost certain. Data from LSEG indicates traders are anticipating at least two 25-basis-point cuts in the coming year. Lower interest rates diminish the opportunity cost of holding non-yielding gold, making it more attractive to investors.

Silver Outshines Gold in Relative Performance

A notable development in the precious metals complex has been the exceptional performance of silver. The white metal hit a fresh record high of $67.45 per ounce on Friday. With a staggering year-to-date increase of 132 percent, silver has significantly outpaced gold's already robust gains.

"Gold and silver are highly correlated," commented Michael Matousek, Head Trader at U.S. Global Investors. "However, silver has been leading over the past two months. When such a large performance gap opens, investors often begin increasing their exposure to gold."

Technical Outlook and Geopolitical Support

From a chart perspective, gold is trading just below its October record high of $4,381.58. The momentum indicator RSI is in overbought territory, suggesting the potential for a short-term consolidation phase before the metal can attempt to establish new highs. Ongoing geopolitical risks, including tensions in Ukraine and halted Venezuelan oil shipments, continue to underpin safe-haven demand, providing a floor for any pullbacks.