Gold prices softened slightly on Friday but remained firmly near historic highs, underpinned by easing US inflation, rising expectations of interest-rate cuts, and persistent geopolitical risks that continue to drive safe-haven demand.
The precious metal dipped 0.14% to $4,324.75 per ounce on December 19, after trading around $4,320 earlier in the session. Despite the modest daily pullback, gold is on track for a second consecutive weekly gain, reflecting sustained investor confidence in bullion as a hedge against economic uncertainty.
Market attention has been squarely focused on fresh US inflation data, which showed price pressures easing faster than anticipated. November headline inflation slowed to 2.7%, below market expectations of 3.1%, while core inflation eased to 2.6%, its lowest level since March 2021. The data reinforced the view that the Federal Reserve’s aggressive tightening cycle has largely done its work, strengthening expectations that policymakers may soon pivot toward rate cuts.
Lower interest rates typically benefit gold, which does not offer yield, by reducing the opportunity cost of holding the metal. Futures markets are now pricing in about a 25% chance of a rate cut as early as January, with near certainty that borrowing costs will be lowered by April.
However, analysts caution that the latest inflation figures came with caveats. The ongoing federal shutdown disrupted the Bureau of Labor Statistics’ data collection, limiting the reliability of month-on-month comparisons and leaving some uncertainty around the true pace of disinflation.
Beyond macroeconomic data, geopolitical developments have continued to provide strong support for gold. The United States has halted maritime activity involving sanctioned Venezuelan oil shipments following the seizure of a blacklisted tanker, while tensions surrounding the war in Ukraine remain elevated after President Vladimir Putin reaffirmed territorial claims. Such developments have kept investors cautious, boosting demand for traditional safe-haven assets.
Gold’s performance over the broader horizon has been remarkable. Prices have climbed more than 6% over the past month and are nearly 65% higher than a year ago. If current trends hold, 2025 will mark gold’s strongest annual performance since 1979, underscoring the metal’s enduring appeal in periods of economic transition and global uncertainty.
