On December 1, gold prices showed an upward trend last week, with London spot gold breaking through the 4,200 level and COMEX gold futures posting a weekly gain of over 4%. This week, market attention is centered on the US PCE report release and the outcome of US-Russia talks.
The core driver of precious metal prices currently revolves around shifting expectations regarding the Federal Reserve's monetary policy path. Last month, market expectations for a December Fed rate cut experienced significant fluctuations, becoming the primary driver of gold price movements. Divergent views between Fed hawks and doves emerged, with some officials advocating caution in the absence of clear inflation and employment data. However, amid substantial volatility in US stock and bond markets, the Fed's stance shifted notably, with "preventing labor market deterioration" becoming a key factor pushing for renewed rate cuts. The probability of a December rate cut surged from around 30% to over 80%, triggering a strong rebound in gold prices. This week, the Fed enters its quiet period ahead of the December 9-10 policy meeting. Economic data-wise, the US will release September's PCE report on December 5, which may influence rate cut expectations.
Geopolitical developments also continue to impact precious metals. The Russia-Ukraine conflict saw subtle changes in November. A "28-point peace plan" proposed by US President Trump briefly raised hopes for de-escalation, slightly dampening safe-haven demand. However, Russia's subsequent conservative stance—calling peace talks "premature"—along with new strikes on Kyiv, reignited tensions. Meanwhile, Middle East tensions escalated significantly following the death of a senior Hezbollah leader in an Israeli airstrike, further destabilizing the region. Late November saw Putin publicly discuss peace plans for the first time, preparing for "serious" discussions with the US next week. The outcome of US-Russia-Ukraine talks remains highly uncertain and warrants close monitoring.
From a trend perspective, gold's medium-to-long-term upside potential remains supported by the Fed's rate cut cycle, geopolitical risks, and declining confidence in the US dollar, keeping safe-haven demand elevated. Additionally, the US stock market's reliance on liquidity has effectively "constrained" the Fed, forcing monetary policy to maintain an accommodative stance—raising fresh concerns about the central bank's independence. As December begins, Fed rate cuts appear nearly fully priced in, while the Russia-Ukraine situation shows signs of easing. Investors should remain cautious about technical pullback risks amid crowded long positions, as any "buy-the-rumor-sell-the-news" signals could trigger sharp corrections in precious metals. The market has entered a phase of heightened volatility, and chasing rallies or selling into declines is ill-advised.