Gold approaches $4,500 amid rising geopolitical risks and a weaker US Dollar

LONDON (December 23) Gold (XAU/USD) continues to attract steady buying interest on Tuesday, pushing deeper into uncharted territory as escalating geopolitical tensions keep safe-haven demand firmly in play. At the time of writing, XAU/USD is trading around $4,485, up nearly 1.0% on the day.

Meanwhile, sustained expectations that the Federal Reserve (Fed) could lower interest rates further into 2026 keep the US Dollar (USD) on the defensive, offering an additional tailwind to Bullion. A softer Greenback makes Gold more attractive for overseas buyers, while lower interest rates reduce the opportunity cost of holding the non-yielding asset.

The latest leg higher also reflects year-end repositioning as markets head into the long holiday period. While some profit-taking at elevated levels could trigger short-term consolidation, the broader trend remains constructive, with Gold on course for its strongest annual performance since 1979, up nearly 70% year to date.

Looking ahead, market focus shifts to key US data releases later on Friday, including the ADP Employment Change four-week average, the delayed preliminary Q3 Gross Domestic Product (GDP) report, Durable Goods Orders, Industrial Production, and Consumer Confidence.

Market movers: Fed outlook, geopolitics shape market sentiment

• The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 97.90, hovering near over two-month lows and extending losses for a second consecutive day.
• Geopolitical tensions between the United States and Venezuela remain high after President Donald Trump imposed a blockade on sanctioned oil tankers entering and leaving Venezuela. Speaking on Monday, Trump said the US is “actually pursuing” a tanker that had departed from Venezuela and was under sanctions. US authorities have already seized two Venezuelan-linked oil tankers this month, including one over the weekend.
• Trump also said the United States will retain control of the seized oil, signalling a tough stance toward Caracas. Speaking at a press conference at Mar-a-Lago, he said the oil would not be returned and could be sold, stored, or added to US strategic reserves, although no final decision has been made.
• Beyond Geopolitics, markets are currently pricing in two rate cuts in 2026, though policymakers remain divided after delivering a cumulative 75 basis points of easing this year. Fed Governor Stephen Miran said on Monday that recent economic data should “push people in a dovish direction,” warning that failing to ease policy could raise recession risks. In contrast, Cleveland Fed President Beth Hammack told the Wall Street Journal on Sunday that she sees no need for rate cuts in the coming months, citing persistent inflation risks and signalling that rates could remain in the 3.50%-3.75% range into the spring.
• Attention is also focused on a potential leadership change at the Fed, as Chair Jerome Powell’s term is set to end in May 2026. US President Donald Trump has repeatedly signalled his preference for a Fed Chair who would favour lower interest rates. A CNBC report published on Monday, citing people familiar with the matter, said Trump could announce his decision as early as the first week of January. So far, Trump has interviewed Fed Governor Christopher Waller, while other leading contenders include US National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh.

FXStreet