The precious metals market is experiencing a resurgence, with gold rising above the significant threshold of $2,700 per ounce once againWhile a notable adjustment occurred in November, the fervor surrounding gold remains undiminishedMarket analysts are increasingly optimistic about the potential for gold prices to reach new heights, as expectations of a third interest rate cut from the Federal Reserve next week grow stronger.

The probability of an interest rate cut has surged following the release of the U.SConsumer Price Index (CPI) data for November, which met market expectationsUpon the announcement, traders ramped up their bets on a December cut, raising the likelihood from 86.1% to an impressive 96.4% according to the Chicago Mercantile Exchange's Fed Watch toolWhile there is a prevailing expectation that the Fed will not lower rates in January, the recent CPI figures have nudged the odds slightly upwards to around 23% for a cut at that time as well.

Data from the CME indicates that the chances of the Fed maintaining its current interest rates through December are now at a scant 1.4%, with a staggering 98.6% likelihood of a 25 basis point cut

By next January, the chance of holding rates steady diminishes further to 1.1%, while the cumulative probability of a 25-basis-point reduction sits at 79.9%, with a possibility of a larger 50 basis point reduction at 19%.

With the Fed’s next meeting approaching, a third interest rate cut appears almost inevitableThis anticipation has breathed new life into precious metals, with gold reclaiming its position above $2,700 per ounce, peaking at $2,725.72 on December 12. Concurrently, holdings in gold Exchange Traded Funds (ETFs) have surged, including a notable increase of 2.59 tons in the largest gold ETF, SPDR, bringing total holdings to 873.38 tons.

The catalyst behind gold's recent resurgence lies significantly in the recent CPI data, which bolstered expectations of the Fed cutting rates, enhancing gold's attractiveness as a safe-haven and inflation hedgeIn an interview, Yi Xiaobin, the investment director at Suntime investment, pointed out three main factors propelling the strength of gold: escalating geopolitical risks leading to increased safe-haven investments in gold, ongoing uncertainties in the global economy along with inflationary pressures in Europe and the U.S

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making physical assets like gold particularly appealing, and a marked increase in gold reserves by central banks worldwide, which directly impacts supply and demand dynamics in the gold market and strengthens market confidence in gold prices.

“In the short term, gold still has upward momentum, and we're positioned with approximately 60% long positionsThe previous high of around $2,790 per ounce will pose some resistance, and breaking through that level may require further positive developments,” commented Lin Rong, a seasoned gold investor.

In addition to gold, silver has also shown signs of a rebound, with spot silver now priced at $32 per ounce, marking over a 35% increase this year, though still shy of this year’s high of $34.86 per ounce.

The research group at Founder Futures indicated that in 2024, silver will largely follow the fluctuations of gold prices, with its financial and safe-haven attributes driving its price direction

Additionally, silver's commodity characteristics contribute to its price volatility, further affecting market dynamics.

Despite the marked pullback in gold throughout November, many maintain that the gold bull market is far from overGoldman Sachs has consistently advocated for gold, with analysts Lina Thomas and Daan Struyven publishing a report on December 10 that challenges the notion that a long-term strong dollar will prevent gold from reaching $3,000 per ounce by 2025.

The analysts argue that the primary driver of gold demand is actually U.Spolicy interest rates, rather than the dollar itselfGoldman anticipates that if the Fed cuts rates by 125 basis points by the end of next year, gold prices could rise by up to 7%. Alternatively, if the Fed were to implement only one more cut, gold may peak at about $2,890 per ounce.

Goldman also contends that a strong dollar will not impede central banks from acquiring gold

Central banks prefer to utilize their dollar reserves to purchase gold, which means even if the dollar appreciates, key buyers like China may increase their gold purchases during periods of currency weakness to bolster monetary confidenceThe forecast suggests that such central bank buying could lift gold prices by 9% by the end of 2025.

Echoing Goldman’s sentiments, Max Layton, head of global commodity research at Citibank, believes that within the next 6 to 12 months, gold prices could challenge the $3,000 per ounce mark, driven by heightened economic uncertainty in the U.Sand Europe, reinforcing its role as a wealth preservation tool—a trend likely to enhance ETF and investment demand.

Recent data from the People's Bank of China reveals that as of the end of November 2024, China's official gold reserves totaled 72.96 million ounces, reflecting an increase of 160,000 ounces since the end of October

This marks the central bank's first purchase of gold in six months.

From the perspective of optimizing the structure of international reserves, the People's Bank of China's increased gold holdings align with long-term strategic goalsFurthermore, gold serves as a globally accepted final means of payment; thus, increasing gold reserves enhances the credibility of the sovereign currency, creating favorable conditions for the internationalization of the Renminbi.

Economist Pang Ming asserts that given gold’s advantages in risk aversion, inflation resistance, and long-term preservation of value, the central bank's motivation to incorporate and dynamically adjust gold in its international reserve composition remains unchanged, as does the overarching direction of steadily increasing gold reserves.

The World Gold Council reported that global gold demand rose by 5% year-over-year in the third quarter, reaching 1,313 tons and surpassing $100 billion for the first time