Gold Surges Past 4500! Three Forces Align, How to Strategize and Risk Tips for the Future

Gold continues to hit new highs, approaching the psychological level of 4500 USD once again. During the trading session on December 23, gold even climbed to a high of 4497 USD, just a hair away from the round number. Tracing the source of this rally, since touching 3920 USD in late November, it has stabilized and rebounded, with a total increase of over 14%, marking a substantial upward wave.

**Three Major Drivers Support the Gold Rally**

Behind this upward trend are three supporting factors: escalating geopolitical risks, expectations of Fed rate cuts, and a weakening US dollar. Federal Reserve Board member Milan recently signaled that if rate cuts cease next year, the risk of recession may be unavoidable, with rising unemployment threatening the economy. Based on this, Goldman Sachs predicts the Fed will pause rate hikes in January 2026, then cut rates once each in March and June, each by 25 basis points, ultimately pushing the federal funds rate into a "neutral but slightly low" range of 3% to 3.25%.

Inflation is also improving. The US November Consumer Price Index (CPI) increased by 2.7% year-over-year, with core inflation rising 2.6%, both below market expectations of 3.1% and 3%, easing inflation fears and laying the groundwork for the Fed to implement two rate cuts next year. Geopolitically, peace negotiations between Ukraine and Russia have stalled, and the US has intensified sanctions on Venezuelan oil tankers, further increasing instability and reinforcing gold’s safe-haven status.

**Economic Data Will Set the Future Market Direction**

Investors should closely monitor upcoming economic data releases, including the US Q3 GDP, October durable goods orders, November industrial production, and Q3 core PCE inflation index, as these will provide key clues about the US economic outlook.

**US Dollar Weakness Will Further Support Gold Prices**

The US dollar is currently testing the critical support level of 98.0. Japanese Finance Minister Shunichi Suzuki recently issued the sternest warning to speculators so far, as a strengthening yen has driven the dollar lower. It is expected that the dollar will break below 98.0, opening further downside space, which will undoubtedly create a larger stage for gold to rise.

**Long-term Outlook Optimistic, Short-term Caution on Profit-Taking**

Looking ahead to 2026, the US fiscal deficit remains a core driver of gold demand. Investors view gold as a hedge against debt risks and a weakening dollar. With long-term government bond yields rising in major countries, debt risks may re-enter market focus. It’s possible that the Fed will unexpectedly cut rates, implement QE, or adopt yield curve control measures, making next year’s gold market worth watching. JPMorgan Chase indicates that tariff uncertainties combined with strong demand from ETFs and central banks worldwide will push gold prices above 4000 USD in 2025, and emerging demand from Chinese insurers and the crypto community could help push gold to 5055 USD by the end of 2026.

However, the approaching Christmas holiday leads to light market trading, which may increase volatility. Investors should be cautious of profit-taking after rapid gains. In the short term, focus on bullish opportunities around 4450 USD.

**Technical Analysis and Trading Cost Considerations**

The daily chart shows that since November 5, gold has entered a new rally phase, with a series of higher highs indicating a generally healthy trend. However, the RSI is in overbought territory, warning of increased short-term risks. The support/resistance boundary is set at 4450 USD; a break above this level can maintain a bullish outlook, but if it falls below, a consolidation phase at high levels should be anticipated.

Investors aiming to capitalize on this trend should carefully select entry and exit points within trading costs such as IB commissions. Avoid blindly chasing at extreme highs; combine position management and stop-loss strategies to mitigate short-term volatility risks. Given the recent light trading environment, price fluctuations may be amplified, so cautious decision-making is crucial.