Gold Closes In on Record High as Markets Price In December Rate Cut
Gold Closes In on Record High as Markets Price In December Rate Cut
Gold futures settled near $4,240 per ounce on Friday, closing out their fourth consecutive month of gains and bringing the precious metal back within striking distance of its October record high. The rally comes as markets increasingly price in a December rate cut from the Federal Reserve.
Why Gold Is Surging
Fed Rate Cut Expectations
Dovish commentary from Federal Reserve officials has raised the odds that policymakers will cut interest rates by at least 25 basis points at their December meeting. Since gold doesn't produce income, its relative attractiveness improves when interest rates fall—lower rates reduce the opportunity cost of holding non-yielding assets.
Dollar Weakness
An easing in the US dollar has provided additional tailwinds for gold, which is priced in dollars and becomes cheaper for foreign buyers when the greenback weakens.
Central Bank Buying
Central banks worldwide continue to accumulate gold reserves at a historic pace. This structural demand has provided a floor under prices even during periods of profit-taking.
"We have a tremendous deficit... we also have a tremendous amount of government spending, and on top of that, we have a tremendous amount of central bank buying," said Michele Schneider, Marketgauge.com chief strategist.
The Numbers
| Metric | Value |
|---|---|
| Current Price | ~$4,240/oz |
| Record High (Oct 20) | $4,336/oz |
| YTD Gain | +60% |
| Distance from Record | ~2.3% |
Gold hit its all-time high of $4,336 per ounce on October 20 before pulling back about 10% through early November. The recent recovery has erased much of that decline.
Trump's Tax Comments Add Fuel
On Thanksgiving, President Trump reiterated his aim to potentially eliminate income tax, citing expected revenue from his tariff policy.
"Over the next couple of years, I think we'll substantially be cutting, and maybe cutting out completely... income tax," Trump said, adding that "the money we're taking in is going to be so large."
These comments, combined with earlier mentions of a potential "tariff dividend" for non-high-income earners, have stoked inflation concerns—a traditional catalyst for gold buying.
"All of this is very inflationary, and that's what gold is really responding to. I think $4,700 would be a good next target," Schneider noted, referring to her 2026 price forecast.
Wall Street Remains Bullish
Despite the largest one-day sell-off in over a decade earlier this month, major Wall Street firms maintain bullish outlooks:
Goldman Sachs: $4,900 Target
"We still expect continued central bank buying, alongside private investor flows under Fed easing, to lift gold prices to $4,900 by end-2026, with significant upside if the private investor diversification theme were to gain more traction."
UBS: $4,500 Target
UBS recently raised its price target to $4,500 per ounce by mid-2026.
"Our view on gold remains bullish. We think gold's role as a portfolio diversifier and geopolitical hedge is undiminished."
Investment Implications
For Portfolio Protection
Gold's traditional role as a hedge against inflation and currency debasement appears intact. With fiscal spending expected to remain elevated and "run-it-hot" policies continuing into 2026, the case for gold allocation remains compelling.
Allocation Considerations
Most financial advisors recommend a 5-10% allocation to gold and precious metals as part of a diversified portfolio. This can be achieved through:
- Physical gold (coins, bars)
- Gold ETFs (GLD, IAU)
- Gold mining stocks (GDX, individual miners)
- Gold futures (for sophisticated investors)
Risks to Consider
- A more hawkish Fed pivot could pressure prices
- Stronger-than-expected dollar rally
- Profit-taking after the strong 2025 run
- Reduced geopolitical tensions
The Bottom Line
Gold's fourth consecutive monthly gain and proximity to record highs reflects a confluence of supportive factors: imminent Fed rate cuts, persistent inflation concerns, continued central bank accumulation, and fiscal policy uncertainty.
With Wall Street targets ranging from $4,500 to $4,900 over the next 12-18 months, the path of least resistance appears higher. However, after a 60% gain in 2025, investors should be prepared for volatility and consider dollar-cost averaging rather than lump-sum purchases.
For those without gold exposure, the current environment provides a reasonable entry point for building a position as part of a broader inflation-protection strategy.
This article is for informational purposes only and does not constitute investment advice. Gold prices can be volatile and past performance does not guarantee future results.