Gold Breaks Through $4500: Driving Factors, Sustainability, and Allocation Implications

Gold prices broke through the historical high of $4500 per ounce in December 2025, becoming one of the best-performing assets of the year [2]. Its rise is not due to a single factor but a resonance of multiple driving factors:

1. Fed Monetary Policy Shift
   : In December 2025, the Fed completed its third consecutive interest rate cut, lowering the federal funds rate to 3.5%-3.75% and maintaining the expectation of another cut in 2026 [3]. Lower interest rates reduce the opportunity cost of holding non-yielding gold, enhancing its attractiveness.
2. Persistent Geopolitical Risks
   : The Ukraine conflict, tensions in the Middle East, and recurring trade frictions have increased investors’ demand for gold as a traditional safe-haven asset [5].
3. Growth in Structural Demand
   : Data from the World Gold Council shows that global central banks and ETFs significantly increased their gold allocations in 2025, and central banks are expected to continue buying about 900 tons of gold in 2026, forming long-term demand support [6].

1. Cyclical Characteristics of Resonance Among Three Factors
   : This rise in gold prices benefits from the overlap of the monetary policy easing cycle, geopolitical risk cycle, and long-term structural demand cycle; this multi-cycle resonance makes the upward momentum of gold prices stronger.
2. Strengthening of Gold’s Role
   : In addition to its traditional safe-haven attribute, gold’s functions in countering dollar depreciation and inflation expectations have once again attracted market attention, becoming an important diversification tool in investors’ portfolios.

• If geopolitical tensions ease unexpectedly, it will weaken gold’s safe-haven demand.
• If economic data is stronger than expected leading to a pullback in Fed rate cut expectations, gold prices may correct [4].
• During periods of weak liquidity at the end of the year, liquidation of leveraged long positions may trigger short-term price fluctuations.

• For investors seeking to hedge against geopolitical risks, dollar depreciation, and inflation, the allocation value of gold has increased.
• Growth in long-term structural demand provides bottom support for gold prices.

Gold breaking through the $4500 per ounce high is the result of multiple factors. Institutions are cautiously optimistic about its high-level operation in the next 2-3 years, but need to pay attention to risks such as geopolitical situations, monetary policy, and liquidity. Investors can evaluate the role of gold in their portfolios based on their own risk preferences and asset allocation goals, without excessively chasing short-term gains or blindly being bearish.