Fed-Cut Odds and Central Banks Push Gold Higher Up

Fed-Cut Odds and Central Banks Push Gold Higher Up

Introduction
Early December’s moves in the gold complex were driven by two clear, measurable forces: rising odds of a U.S. Federal Reserve rate cut and a renewed wave of central-bank accumulation. Those twin drivers produced immediate price support and prompted analysts and miners to revise forecasts and strategy. This article breaks down the events that moved the needle, what they mean for supply and demand, and which signals investors should track next.

Why Prices Reacted: Policy Expectations and Official Buying

Fed-rate expectations: the immediate catalyst

Futures markets priced in a high probability of a Fed rate cut at the December 9–10 meeting, and that shift in expectations provided the short-term bullish impulse for gold. As real and nominal U.S. yields fell on the prospect of lower policy rates, the opportunity cost of holding non-yielding bullion dropped — a textbook tailwind for gold. Spot prices rebounded in the first days of December after this recalibration of monetary policy odds.

Central banks: structural demand accelerating

At the same time, official-sector buying remained robust. Central banks purchased large volumes of gold in October — about 53 tonnes, a roughly 36% increase month-on-month — the strongest monthly total seen so far in 2025. That active accumulation is not only a statement of reserve diversification but also a material source of physical demand that tightens available supply, particularly when ETFs and private investors are also buyers.

Flows and Forecasts: ETFs, Analysts, and China’s Reorientation

ETF inflows and re-routed retail demand

Investment flows have increasingly favored ETFs over traditional jewelry purchases. In the first nine months of the year, ETF holdings surged substantially, reflecting a shift toward paper-based and institutional access to gold. This trend magnified price sensitivity to macro drivers: when rates and liquidity signals change, ETF allocations can move quickly and lift prices with scale.

China: jewelry slump, investment rise

China — historically the world’s largest jewelry market — showed a pronounced divergence between retail and investment demand. A combination of a roughly 50% year-to-date price increase and the end of a long-standing tax rebate on physical gold caused consumer jewelry sales to slump, with some retailers reporting sales declines of 40–50% and numerous store closures. At the same time, Chinese investors funneled capital into ETFs and other investment vehicles, illustrating how higher gold prices can pivot a market from ornamentation to allocation.

Miners and Price Forecasts: How the Industry is Responding

Analyst upgrades and forward projections

Major banks have adjusted their outlooks to reflect stronger structural demand. One leading bank raised its 2026 gold forecast to $4,450 an ounce and indicated a range that contemplates both heightened central-bank demand and ETF absorption of mined output. Such revisions are important because they reshape investor expectations and can feed into capital allocation decisions across the sector.

Mining equities: performance and strategic moves

Equity markets reacted with enthusiasm. Large producers posted significant gains in recent months: some names rose double- or triple-digit percentages year-to-date, with notable monthly spikes in November as sentiment shifted. Producers are leveraging the rally — for example, one major miner has signaled plans for a North American-focused subsidiary IPO, a move designed to unlock value and attract specialized investors.

Conclusion

This week’s rally in gold was neither random nor purely speculative. It was the result of measurable changes: a higher-probability Fed rate cut that reduced real yields, sustained and elevated central-bank buying that drained available supply, and a structural shift in demand patterns — notably in China — away from jewelry and toward investment vehicles. Analysts have raised price targets and mining stocks have reacted accordingly, crystallizing a feedback loop between macro expectations and sector performance. For investors and stakeholders, the coming weeks will test whether central-bank purchases persist and whether rate-cut expectations hold — both are the clearest, most direct drivers of gold’s near-term trajectory.

Data points cited reflect developments reported in early December 2025: central-bank purchases of ~53 tonnes in October, significant ETF inflows year-to-date, analyst 2026 price uplift to ~$4,450/oz, and large gains in major mining stocks.