Gold has grown even more luminous as escalating geopolitical tensions and mounting bets on further US interest-rate cuts propelled the precious metal to a record high, capping its strongest annual performance in more than four decades.

Prices jumped more than 1.5%, surpassing the previous record of 4,381 dollars an ounce set in Oct. Traders are increasingly wagering that the Federal Reserve will cut interest rates twice in 2026, following a string of economic data released last week. US President Donald Trump has also voiced support for looser monetary policy. Lower interest rates typically provide a tailwind for non-yielding assets such as precious metals, Bloomberg notes.

Heightened geopolitical tensions have reinforced gold and silver’s role as safe havens, with Washington tightening its oil blockade on Venezuela and Ukraine striking a tanker linked to Russia’s shadow fleet in the Mediterranean for the first time.

Both metals are now heading for their strongest annual gains since 1979, with gold up about two-thirds this year, buoyed by heavy central-bank buying, strong inflows into gold-backed ETFs, and early momentum sparked by Donald Trump’s aggressive trade agenda and challenges to US central bank independence.

Gold, bonds and currencies
Investors have also played a pivotal role in gold’s ascent, in part driven by the so-called “debasement trade”—a retreat from government bonds and the currencies they are denominated in, amid fears that their value will erode over time as debt levels continue to climb.

Gold-backed ETFs have recorded inflows for five consecutive weeks, according to data compiled by Bloomberg. Figures from the World Gold Council show that total holdings in these funds have increased in every month this year except May.

“Today’s rally is largely due to early positioning around expectations of Fed rate cuts, amplified by thinner year-end liquidity,” Dilin Wu, a strategist at Pepperstone Group Ltd., told Bloomberg. Sluggish job growth and lower-than-expected US inflation in November reinforced the case for further easing, she added.

Other precious metals also advanced. Silver surged as much as 3.4%, reaching record levels just shy of 70 dollars an ounce, while palladium jumped 5%. Platinum extended its run for an eighth straight session, trading above 2,000 dollars an ounce for the first time since 2008.