Is the gold price about to break through? The Federal Reserve's rate cut expectations boost gold to surpass the 4300 mark

Weak Employment Data, December Rate Cut Expectations Rise

The US labor market has recently underperformed expectations. In October, US companies announced layoffs of 153,000 people, a month-on-month increase of 183%, the highest since 2003. At the same time, the September non-farm unemployment rate rose to 4.4%, a 175% increase compared to the same period last year. These data fully indicate that the US employment market is under pressure.

According to CME’s FedWatch rate tool, the market’s probability of a 25 bps rate cut by the Federal Reserve in December is close to 85%. The Federal Reserve’s Beige Book also revealed that the government shutdown negatively impacted consumer shopping, leading to a further decline in consumer spending. Against this backdrop, rate cut expectations have become a market consensus.

US Dollar Under Pressure, 10-Year US Treasury Yield Falls Below 4%

Influenced by rate cut expectations, the yield on the 10-year US Treasury has fallen below the critical 4% level, providing clear support for gold priced in US dollars. Notably, the US dollar’s rally is constrained by multiple factors—Hassett(Kevin Hassett), a popular candidate for the next Federal Reserve Chair, market expectations suggest that the Fed may have significant room to cut rates next year.

On the other hand, the Japanese government plans to issue at least 11.5 trillion yen in additional government bonds, raising concerns about Japan’s fiscal deterioration. Japanese long-term bond yields have hit a 20-year high. As the yen continues to weaken, the Bank of Japan has issued verbal intervention warnings, further limiting the dollar’s upward potential and supporting gold prices.

Deutsche Bank Raises Gold Price Forecast, $4,300 Nears

Deutsche Bank’s latest report shows that the average gold price forecast for next year has been raised from $4,000 to $4,450, with an estimated range of $3,950 to $4,950. If gold reaches $4,950, it would be about 14% higher than the futures contract expiring at the end of next year. The recent adjustment reflects that gold prices at the $3,900 level have formed support, with only slight increases in supply.

However, investors should be cautious of risks: if the stock market experiences a deep correction, if the Fed cuts rates fewer times than expected, or if central banks slow down gold purchases, gold prices could face a pullback.

Technical Outlook Indicates Upside Potential

Gold remains above the short-term upward trendline, with bulls and bears competing within the $4,140–$4,160 range. If gold effectively breaks through the $4,160 resistance, it could further rebound to challenge $4,220, heading toward resistance near $4,300.

Conversely, if gold falls below $4,140, there is a risk of resuming a downward trend. The current 2-hour chart shows the upward trendline remains intact, providing good technical support for the bulls.

Market Outlook

The current core driver of gold prices is the weakness of the US dollar. Supported by weak employment data and a shift in central bank policies, gold further rose to a daily high of $4,173 on Wednesday (November 26), reaching a nearly two-week high since November 14. Ahead of the December Federal Reserve meeting, the US government shutdown has prevented further key data releases. During this vacuum, the continued weakness in the labor market will sustain rate cut expectations, providing upward momentum for gold.