The nearly $60 surge in gold prices: the combined driving forces of interest rate cut expectations and safe-haven funds

On Friday during Asian market hours, gold once again became the focus. Spot gold surged to around $4,378 per ounce, with a single-day jump of nearly $60. What exactly is driving this wave of market movement?

Rate Cut Expectations Ignite Rally, Federal Reserve Policy Shift Becomes Gold Price Catalyst

The Federal Reserve’s monetary policy stance is quietly changing. At the December decision meeting last year, the federal funds rate was lowered to a range of 3.50%-3.75%, and the market generally expects further rate cuts this year. According to the minutes from the Federal Open Market Committee, most officials favor continued easing amid persistent downward inflation pressures. While there are disagreements on the timing and magnitude of rate cuts, the overall direction is clear.

A lower interest rate environment is particularly favorable for gold—when real yields decline, the opportunity cost of holding non-yielding gold decreases, directly enhancing its relative attractiveness. Coupled with market expectations of further rate cuts in 2026, the easing of monetary policy has become a key pillar supporting gold’s rise.

Geopolitical Risks Rise, Safe-Haven Funds Continue to Flow into Gold

In addition to the Fed’s policy changes, the current complex geopolitical situation is also pushing up gold prices. Ongoing tensions between Israel and Iran, escalating US-Venezuela relations—these uncertainties are increasing market demand for safe-haven assets.

Gold’s traditional status as a safe-haven asset is especially prominent at this time. Institutional investors and central banks around the world are increasing their gold holdings, providing solid support at the price floor. In fact, gold’s performance throughout 2025 has already reflected this—an approximate 65% increase for the year, marking the strongest annual return since 1979.

Technical Outlook: High-Level Fluctuations, Short-Term Risks Accumulating

From the chart perspective, after a significant rally, gold has entered a high-level zone, with around $4,300 per ounce gradually becoming an important support level. As long as this level holds, gold still has the potential to challenge new highs. However, technical indicators are already at elevated levels, suggesting the possibility of a short-term pullback or consolidation.

Caution is warranted as profit-taking pressures are quietly building. The Chicago Mercantile Exchange recently adjusted margin requirements for precious metals like gold and silver, meaning leveraged long traders need to commit more capital to maintain their positions. If forced to reduce holdings, this could intensify short-term price volatility.

Market Outlook: Medium to Long-Term Optimism but Vigilant Against Volatility

Overall, supported by rate cut expectations and safe-haven demand, the medium to long-term outlook for gold remains positive. The Fed’s easing path will continue to suppress real yields, and global uncertainties will sustain demand for safe assets.

However, short-term trading should be more cautious. Strong US economic data or a phased rebound in the US dollar could exert downward pressure on gold. Additionally, high-level technical fluctuations require traders to be prepared for possible corrections. In general, buying on dips remains a more prudent trading strategy.