Gold's 55% Rally Today Turns Into a 'Debasement Trade' Stampede— Investors Fear It's Only the Beginning

Gold today is neither here nor there, but the price could move higher as chances of a December rate cut increase. The US dollar dip was a reaction to the news that some Fed officials support easing monetary policy. Meanwhile, the Pound Sterling strengthened against the greenback ahead of the UK budget presentation.

The key support for the precious metal leading into Christmas is the Fed factor. Another potential, strong catalyst is the peace deal brokered by the Trump administration to end the Russia-Ukraine war.

Rustem Umerov, Ukraine's national security adviser, confirmed that a common understanding on the truce had been reached, and details will follow. This development is good news for global markets.

Tough Rate Decision

US Federal Reserve Chairman Jerome Powell is again uneasy because the Federal Open Market Committee (FOMC) will meet on 9 December 2025 without any guidance. The Bureau of Labor Statistics said last week that the November jobs report and inflation data would be available on December 16 and 18, respectively.

Fed Governor Christopher Waller, said, 'While it is always nice to have more data, as economists, we are skilled at using whatever available data there is to formulate forecasts.' Waller and New York Fed President John Williams are in favour of a rate cut. For Williams, there's room for a further adjustment in the near term.

A third consecutive quarter-point cut would bring the Federal Funds rate down to 3.5%-3.75%. Powell sees a challenging situation as the Fed has yet to contain inflation.

Voting FOMC members opposed to the rate include Kansas City Fed president Jeffrey Schmid and Fed Governor Michael Barr. Inflation is a concern for Cleveland Fed President Beth Hammack and Chicago Fed President Austan Goolsbee. The inflation reading in September was 3%, while the target is 2%.

There are unconfirmed reports that a new Fed chairman will be announced soon, replacing Powell.

Pressure on the Dollar

The downward pressure is now on the US dollar. Hard currencies usually weaken as markets start pricing in rate cuts. The Fed's benchmark rate is the base reference for US Treasury yields. When rates go down, short-term Treasury yields also decline.

One scenario is that when investors shift towards higher-risk and higher-return assets, demand for the dollar falls. Moreover, the USD loses its appeal as a 'safe-haven' currency, while investors ditch dollar-denominated instruments.

Foreign currencies, especially in emerging markets, strengthen against the greenback. It also favours exporters. The US Fed's monetary policy has a heavy influence on the dollar's value. Rate cuts often lead to a global dollar correction.

Gold Shines Again

Gold is back in the conversation; just days ago, the price was plummeting. Buyers are now forecasting a $4,100 price (£3,112.54) as the odds of a rate cut have risen. The price is just a key support level, so gold could still break the trendline resistance level of $4,200 (£3,188.46).

There are enough Fed members to make a Christmas wish like a rate cut come true. Stephen Miran, a member of the Federal Reserve Board of Governors, even argued that a softening economy demands larger cuts to return monetary policy to neutral.