Gold prices (XAU/USD) continued their rally and held above $4,350 in early European trading on Wednesday. So far this year, gold has risen around 65% and is poised for its biggest annual gain since 1979, making many market participants increasingly curious: will this trend continue or is it starting to face a correction?

The main driver of gold's rally comes from expectations of a US interest rate cut in 2026. When interest rates fall, the opportunity cost of holding gold shrinks because gold doesn't provide the same yield as bonds. Furthermore, global uncertainty remains high—from the Israel-Iran conflict to US-Venezuela tensions—which typically sends investors rushing to safe haven assets.

However, there are also factors that could restrain the rally. CME Group raised margin requirements for gold and silver futures contracts, and this often triggers profit-taking or portfolio rebalancing as traders seek additional funds. Furthermore, if progress is indeed made on the Ukraine peace deal, safe-haven demand could subside and selling pressure could emerge.

The market is now awaiting the release of US Initial Jobless Claims data on Wednesday. The consensus forecast is for a slight increase to 220,000 (week ending December 27) from 214,000 the previous week. With the New Year holiday approaching, trading volume is expected to be thinner, so price movements could feel sharper, even if the trigger is small. (az)

Source: Newsmaker.id