Gold eyes fresh highs post Fed rate cut; check strategy, key levels here

Gold: Breaks higher on dovish FOMC outcome

Performance: Moves out of consolidation range

Buoyed by a dovish FOMC outcome, spot gold surged on December 11 extending its gains to the second day. At the time of writing this article, spot gold was trading with a gain of 1.3 per cent at $4282.

 

The MCX February gold contract was changing hands at Rs 132,502, up 2.02 per cent for the day.

 

Gold also benefitted on a slump in Oracle shares as the company's spending in fiscal 2026 Q2, driven by capex in data centres and other equipment, exceeded the forecast ($12 billion vs the estimate of $8.25 billion) and raised doubts about profit generation. Oracle's credit risk surged to a fresh 16-year high.

 

FOMC decision: Fiscal dominance apparent

As widely expected, the US Federal Reserve cut the Fed Fund rate by 25 bps to 3.5 per cent-3.75 per cent on December 10, in a 9-3 vote. FOMC, signalling a brief pause said. that it will consider the extent and timing of additional adjustments. The Fed said to address money market tightness, it will start buying $40 billion of treasury bills/month from December 12, as a reserve management strategy. Its T bill buying plan coupled with the Fed Chair Powell’s presser in which he expressed grave concerns over the job market have been construed as dovish by investors. Buying Treasury bills is a direct support to the profligate US Government; a fiscal dominance policy is becoming quite apparent. Although, technically, T-bill buying plan is not a QE as it does not extend duration and as per the Fed it is not an economic stimulus, however, ending QT and starting T-bill purchases is a liquidity-friendly approach.  

 

Consequently, the US Dollar Index is slumping while commodities, bonds and risk assets are rallying hard. 

US Dollar Index and yields: Lower

The US Dollar posted its worst day since September following the Fed's decision to cut rates. Closing around 0.45 per cent lower at 98.78 on Wednesday, it extended its decline on Thursday. At the time of writing, the Index was hovering around 98.25, down nearly 0.55 per cent for the day.

 

Ten-year US yields fell nearly 0.75 per cent to 4.14 per cent on December 10 and eased further by 2 bps on December 11, while 2-year yields, which had earlier slumped over 2 per cent to 3.54 per cent on dovish Fed, were down by 2 bps to 3.52 per cent. 

Gold ETF: Holdings continue to support

As of December 10, total known global gold ETF holdings stood at 97.83 MOz, highest since June 2022.

 

ETF holdings have risen 18.02 per cent YTD as ETFs have recorded a net inflow of 466 tons so far this year. 

 

India’s pension regulator allows pension funds to invest in gold and silver:

 

S Ramann, chairman of the regulatory body the Pension Fund Regulatory and Development Authority (PFRDA), said that the regulator is planning to permit NPS funds to invest in gold and silver exchange traded funds. He added that 1 per cent of the corpus under alternative investment category can be permitted for silver and gold ETFs.

  National Pension System funds may buy into more stocks and debt securities, as well as some gold and silver funds and more real estate vehicles. NPS, introduced two decades ago, oversees about $177 billion.

 

Global debt monitor: Debt continues to surge

Bloomberg reported that in its latest Global Debt Monitor, the Institute of International Finance estimated that the global sovereign debt surged by 8 per cent, or $8 trillion in the third quarter on QoQ basis as the US and China accounted for almost a third the rise.

  Global debt has climbed to a record $346 trillion in Q3 2025. US Fed will start buying $40 billion of Treasury bills per month starting December to address liquidity crunch in the money markets. Shanghai gold premium over London price has drifted into a wide discount of $79/Oz. 

Data roundup: JOLTS data mixed

US JOLTs job data were slightly encouraging as openings rose from 7227K in August to 7658K in September, though quits level fell from 3128K to 2941K (forecast 3150K). JOLTs layoff levels increased from 1781K to 1854K. US Employment cost index fell from 0.9 per cent in Q2 to 0.8 per cent in Q3. US weekly job data released on Thursday were mixed as initial claims surged while continuing claims fell by 100K. Trade deficit shrank from $59.3 b in August to $52.80 billion in September, lowest since 2020. 

Upcoming data and events: Focus on nonfarm payroll and BoJ

Major US data on tap include November nonfarm payroll (Dec. 16), retail sales advance (Dec. 16), S&P PMIs (Dec. 16) and November CPI (Dec. 18). Out of Asia, focus will be on China's retail sales, industrial production and home prices (Dec. 15). Major Eurozone data releases include PMIs (Dec. 16) and CPI (Dec. 17).

  European Central Bank and Bank of England will deliver their monetary policies on Dec. 18, while Bank of Japan will announce its much-awaited monetary policy decision on Dec. 19, wherein it is expected to hike its benchmark rate by 25 bps to 0.75 per cent, its second hike this year following a rate hike of 25 bps on January 24. BoJ’s decision may trigger carry trade unwinding, though probability is somewhat subdued. 

Outlook: Bullish

Gold is expected to trade with a positive bias as the December 10 FOMC decision and its assessments stoke inflation concerns amid a combination of fiscal and monetary policies clearly geared towards fiscal dominance. Oracle’s slump is supportive of higher gold prices.

  Gold is looking positive as it has moved out of $4,160-$4,245 consolidation range.    

  The yellow metal can scale fresh record highs in the coming weeks. Risk may come from healthy risk appetite.

  Support is at $4245/$4200/$4160. Resistance is at $4300/$4381 (all-time high).

  (Disclaimer: Praveen Singh,  head currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)