Gold prices are set to close their fifth consecutive weekly gain as markets react to renewed signals from the U.S. Federal Reserve about further monetary easing. Despite recent volatility in equities and currencies, gold continues to attract safe-haven demand. Investors expect additional interest rate cuts to support the slowing U.S. economy.

Gold Rises on Fed’s Dovish Signals

On Friday, December gold futures traded near $1,930 per ounce, gaining 0.5%. This rise comes amid broad risk aversion and a weaker U.S. dollar. Fed Chair Jerome Powell recently said the central bank remains open to more rate cuts if inflation continues to fall.

This softer stance contrasts with the hawkish tone seen earlier in 2025. It signals the Fed wants to cushion economic growth as inflation cools from multi-year highs.

Why Gold Benefits from Policy Easing

Gold is a well-known hedge against inflation and currency debasement. It also benefits when real interest rates fall or stay low. Rate cuts reduce the opportunity cost of holding non-yielding assets like gold, making bullion more attractive.

Lower rates also weaken the U.S. dollar. Since gold is priced in dollars, a weaker dollar pushes gold prices higher. Combined with market uncertainty, this has increased demand for gold as a safe haven.

Inflation and Growth Outlook

U.S. inflation slowed to 3.1% year-on-year, down from a 2024 peak of 6.2%. However, inflation remains above the Fed’s 2% target. Core inflation, excluding food and energy, is around 3.8%. This suggests caution in future monetary policy.

Meanwhile, economic growth is slowing. U.S. GDP growth slowed to 1.2% in Q2 2025. Consumer spending and manufacturing activity have also weakened. These factors support the Fed’s patient approach, which benefits gold.

Gold Demand: Physical and ETF Flows

Physical gold demand remains strong, especially in Asia. Consumers and central banks there continue buying amid geopolitical risks. For example, India’s gold imports rose 8% year-on-year in August, driven by festival season demand.

At the same time, gold-backed ETFs have seen steady inflows over the past month. This shows that institutional investors are turning to gold amid volatile stock and bond markets.

Risks to Watch

Gold prices face some risks:

• If U.S. inflation rises again, the Fed might pause or raise rates. This would hurt gold.

• Better global economic data could reduce safe-haven demand.

• A stronger U.S. dollar against other currencies may push gold prices lower.

ForexFlash Outlook: What to Watch

• Upcoming U.S. inflation reports will reveal if price pressures persist.

• Fed minutes and speeches could hint at the speed of future rate cuts.

• Global geopolitical developments may cause investors to seek safe havens.

• Gold ETF inflows and central bank purchases will show investor sentiment.

Conclusion

Gold’s steady rise amid the Fed’s easing signals highlights its role as a store of value and a hedge against uncertainty. As long as inflation stays above target and growth slows, gold should remain attractive to investors seeking protection.