Gold Rises Amid Growing Expectations of U.S. Rate Cuts and Safe-Haven Flows

Gold extended its upward momentum as investors priced in a higher probability of a Federal Reserve rate cut in early 2026, driven by softer U.S. inflation data and signs of economic cooling. The benchmark XAU/USD pair reached $2,352.60, marking a 1.4% gain in the session and its highest level since October 2024. This move coincided with a sharp decline in U.S. Treasury yields, with the 10-year note dropping to 4.12%, reflecting shifting monetary policy expectations. The rally in gold was further supported by a broad-based sell-off in the U.S. dollar, with the DXY index falling to 103.85, its lowest level since mid-2024. A weaker dollar reduces the opportunity cost of holding non-yielding assets like gold, making it more attractive to international buyers. Meanwhile, the SPDR Gold Trust (GLD), the largest gold-backed ETF, saw inflows of $890 million over the past two trading sessions, signaling strong institutional interest. The shift in market sentiment also impacted long-duration government debt. The iShares 20+ Year Treasury Bond ETF (TLT) gained 2.1%, closing at $118.30, as bond investors positioned for lower interest rates ahead. The rally in TLT and the decline in yields reinforce the broader trend of capital rotating into defensive assets ahead of potential rate cuts and macro uncertainty. Market participants are now closely monitoring upcoming economic releases, including the December employment report and the Fed’s Beige Book, which could further shape rate cut expectations. Gold’s performance remains sensitive to real yields and central bank policy shifts, with analysts suggesting a sustained break above $2,350 could trigger additional technical buying.