Gold Market Review and Key Insights: Last week, gold prices rose steadily. London spot gold closed at $4,299 per ounce (up 2.4% week-on-week), while domestic AU9999 gold ended at 964 yuan per gram (up 1.0% week-on-week).
The December Fed meeting cut rates by 25bps as expected, but internal disagreements over future rate cuts were significant. Three dissenting votes were cast—Governor Milan advocated for a 50bps cut, while two regional Fed presidents favored no cut.
The dot plot median suggests one more rate cut next year. For 2026, projections for 0-1-2-3-4 rate cuts were split among 4-4-4-2-1 members, respectively. One member (likely Milan) called for six aggressive cuts, while three expected one hike. The wider dispersion in the dot plot reflects heightened internal divisions.
Chair Powell struck a dovish tone in his press conference, emphasizing employment downside risks and easing inflation pressures. He noted policy rates are within the estimated neutral range, allowing a wait-and-see approach without urgency to cut further. On employment, he observed continued cooling, with job gains systematically overestimated. AI may partly explain weak hiring but its impact remains limited. Regarding inflation, he suggested tariff effects could peak in Q1 2026 without new tariffs, with inflation moderating in late 2026.
In its economic outlook, the Fed revised up growth estimates while lowering unemployment and PCE inflation forecasts. Supported by fiscal-monetary easing, robust AI investment, and fading tariff-driven inflation, the U.S. economy may enter an ideal state next year.
Additionally, after ending balance sheet runoff on December 1, the Fed announced expansion resuming December 11 to address potential liquidity risks. Powell clarified this move aims solely to replenish liquidity, not quantitative easing (QE). The Fed’s Reserve Management Purchases (RMPs) will buy $40B monthly in short-term bonds through April’s tax season to ease Treasury issuance pressure. With bank reserves tightening and overnight rates elevated, liquidity conditions may loosen post-expansion, potentially benefiting gold.
Latest rate futures imply two 2026 cuts, slightly higher than pre-meeting levels and above the Fed’s median dot plot guidance, signaling market optimism.
Looking ahead, the Fed remains in a broad easing cycle. A dovish leadership shift could accelerate rate cuts, further supporting gold. Alongside monetary easing, U.S. fiscal expansion and sovereign credit risks amid debt servicing pressures continue driving central banks’ gold purchases for reserve diversification. Amid dual monetary-fiscal stimulus, gold’s medium-to-long-term allocation appeal stays strong.
Key signals for gold ETFs (518880) next week: (1) U.S. November CPI; (2) November unemployment and nonfarm payrolls; (3) ECB and BOJ policy decisions.
Comparison of RMB-denominated and international gold prices: Data source: Wind, HuaAn Fund, as of 2025/12/12
Risk Disclosure: Investors should note gold-specific risks, including price volatility, tracking error between fund returns and domestic spot prices, and Shanghai Gold Exchange risks. Fund performance is not guaranteed, and past results don’t predict future returns. The fund’s short operating history may not reflect all market phases. Investments carry risks; due diligence and independent decision-making based on risk tolerance and goals are advised.
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