Gold prices remained elevated in the first week of 2026, signaling continued investor interest amid geopolitical uncertainty and shifting expectations for interest rate cuts. Local markets in the UAE saw 24-karat gold reach Dh538.50 per gram before settling slightly, while global spot prices hovered near $4,490 an ounce. This sustained demand reflects a complex interplay of economic data, geopolitical risks, and central bank activity, all contributing to the precious metal’s safe-haven appeal.
The recent surge in gold prices follows a strong finish to 2025, with gains fueled by expectations that major central banks, including the US Federal Reserve, will ease monetary policy in the coming months. However, upcoming economic data releases will be crucial in determining whether this trend continues, as stronger-than-expected figures could delay anticipated rate reductions.
Global Economic Factors Driving Gold Demand
Spot gold experienced three consecutive days of gains, rising more than 4% before stabilizing as traders focused on upcoming US economic reports. A weaker manufacturing gauge released earlier in the week bolstered expectations for further interest rate cuts by the Federal Reserve, which reduced rates three times in 2025. Fed Governor Stephen Miran has publicly advocated for over a full percentage point of easing in 2026, citing concerns that current policy is hindering economic growth.
Geopolitical Tensions and Safe-Haven Demand
Geopolitical risks continue to underpin gold’s appeal as a safe-haven asset. The recent developments involving Venezuela, including US involvement and concerns about energy supply, have added to existing anxieties. Additionally, escalating tensions between China and Japan, marked by export controls, are contributing to global uncertainty. Even the possibility of US military action regarding Greenland, however unlikely, keeps risk premiums elevated.
Central Bank Accumulation
Central banks are playing a significant role in the current gold market. According to data, November saw approximately 45 tonnes of gold added to reserves, bringing year-to-date purchases close to 300 tonnes. This isn’t seen as opportunistic buying, but rather a long-term strategy to diversify foreign-exchange reserves and reduce reliance on traditional fiat currencies in a changing global financial landscape.
US Economic Data to Test Rate Cut Bets
The coming week is packed with key US economic data releases, including reports on growth, employment, and inflation. Stronger-than-expected numbers could dampen expectations for near-term rate cuts, potentially strengthening the US dollar and putting downward pressure on gold prices. Conversely, weaker data would likely reinforce easing expectations and push gold back towards recent peaks around $4,550 per ounce.
Analysts at the World Gold Council note mixed global signals, with robust US employment and housing data offset by economic contraction in the Eurozone and an uneven recovery in China. These diverging trends highlight the complexity of the current economic environment and the potential for volatility in the precious metals market.
The situation in Venezuela adds another layer of uncertainty. While the long-term impact of US involvement remains unclear, it underscores the ongoing influence of geopolitical events on gold prices. Oil benchmarks and the dollar will also be closely watched as key price drivers this week, competing with the impact of US economic data.
Despite a recent pullback from late-December record highs, the World Gold Council suggests that gold is currently undergoing a period of consolidation, but the underlying uptrend remains intact. Positioning in Brent and WTI futures remains short, indicating continued investor confidence in the long-term outlook for gold.
Looking ahead, traders will be closely monitoring the release of the December jobs report on Friday, as well as other key economic indicators, to gauge the likelihood of further interest rate cuts by the Federal Reserve. The interplay between economic data, geopolitical events, and central bank policy will ultimately determine the direction of gold prices in the near term. The market remains sensitive to any shifts in these factors, and continued volatility is expected.
