Gold analyst interprets upward logic: dual drivers of rate cut expectations and safe-haven demand pushing up gold prices

In early January during Asian trading hours, spot gold continued its strong upward momentum, fluctuating around $4,380 per ounce, with a daily gain of nearly $60. FXStreet analysts conducted an in-depth analysis of the driving forces behind this rally, revealing several core factors supporting gold prices.

Rate Cut Expectations and Safe-Haven Flows Provide Dual Support

Market expectations for the Federal Reserve to cut interest rates further this year are intensifying, representing the most significant macro backdrop in current gold analysis. At the December last year policy meeting, the Fed implemented a 25 basis point rate cut, bringing the federal funds target range to 3.50%–3.75%. More importantly, the FOMC minutes indicated that most officials believe further easing is appropriate as long as inflation continues to decline.

Lower interest rates reduce the opportunity cost of holding gold, providing structural support for the non-yielding precious metal. Meanwhile, ongoing geopolitical risks further strengthen investors’ safe-haven demand. Tensions in the Middle East involving Israel and Iran remain unresolved, and US-Venezuela relations are escalating. These uncertainties continue to drive safe-haven capital flows into gold and other traditional assets.

Gold achieved approximately a 65% annual increase in 2025, marking its best yearly performance since 1979, highlighting the significant role of central bank gold purchases and institutional allocations. This momentum persists into 2026.

Technical Resistance and Structural Adjustment Risks

From a technical perspective, gold prices after a substantial rally are consolidating at high levels, with the overall trend still leaning bullish. The $4,300 per ounce level has become a key support zone; holding above this level could allow for further upward breakthroughs.

However, technical indicators are already at high levels, suggesting short-term profit-taking or consolidation may be needed. The oscillation after consecutive gains is normal, but traders should remain alert to downside risks. In the near term, the $4,350–$4,400 per ounce range could serve as a significant resistance zone; only a break above this could challenge previous highs.

Market Signals from CME Margin Increase

The Chicago Mercantile Exchange recently raised margin requirements for gold, silver, and other precious metals futures. While this move appears technical, it reflects deeper risk management considerations. As traders need to commit more capital to hedge against contract delivery risks, some leveraged long positions may be forced to reduce their holdings.

This signal indicates rising risk awareness among market participants at current high levels. From a gold analysis standpoint, although CME’s action may temporarily limit upside potential, it also demonstrates market self-regulation. The potential for forced liquidation of highly leveraged positions is accumulating, which could increase short-term volatility.

Outlook: Risks and Opportunities Coexist

In the medium to long term, expectations of rate cuts and safe-haven demand will continue to underpin gold’s fundamentals. If the Fed proceeds with rate cuts as market expectations suggest, declining real yields on US Treasuries will further benefit gold. Central bank gold purchases also imply institutional recognition of gold’s value as an asset allocation.

However, short-term risks should not be overlooked. Unexpected strength in US economic data or a phase of dollar rebound could suppress gold prices. Profit-taking pressures are building among traders, and the CME margin hikes introduce leverage risks. Most analysts expect high-level consolidation or slight pullbacks in the near term.

Overall, adopting a “buy on dips” strategy appears appropriate for current conditions. During high-level consolidation, each correction may present an entry opportunity, but risk management—especially controlling leverage—is crucial. Gold remains a valuable long-term asset, and short-term technical adjustments do not alter the medium-term bullish outlook.