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Precious metals are on the rise again, with gold breaking above $4,200 and silver scoring a new all-time high. The moves have generated investor interest amid the market’s unusual dynamics. As a safe-haven, the rise in bullion can prompt traders to worry that a market correction is coming, or signal worries about the state of the economy.

Usually, gold prices and stocks move in opposite directions. But lately, they have been rising in tandem. Expectations around the Fed can explain part of that. Lower interest rates are typically bullish for stocks because they lower borrowing costs and encourage risk-on attitudes. The lower rates are also generally bullish for gold, as the comparative advantage of bonds diminishes and gold offers protection from rising or elevated inflation. Typically, a faster-growing economy that results from lower interest rates generates more inflation.
 

So, Why Are There Concerns About Gold’s Rally?

The expectation of lower rates also hurts the dollar, because other currencies can offer a better return on investment with higher rates. The greenback has depreciated by more than 10% since the start of the year, helping explain some of the gains in gold and silver.

The issue is that economic data has shown signs of weakness, and stock valuations are sky-high. This suggests the stock market might be overvalued, and traders are looking to take profits. If markets experience a significant correction, it could trigger a strong risk-off move and destabilize forex pairs.
 

Crypto Fall Fueling Gold Rise

Notably, cryptocurrencies have not been able to capitalize on the dollar’s weakness, and bitcoin is actually down by 9% since the start of the year. These currencies are seen as highly speculative and could be where signs of market stress are most noticeable. As traders need more liquidity to defend their positions, they will first divest from more risky trades, such as crypto.

Analysts have pointed to the concurrent rise in gold while crypto falls as a potential sign of a rotation towards safe havens. While this would be fantastic for gold bulls, as it implies further support, it could signal broader market weakness that could drag on emerging-market and commodity currencies.
 

Will Gold Keep Rising?

According to major brokerages, gold is expected to resume its upward trend. UBS issued a price target of $4,500 per ounce by the middle of next year. In a note to clients, Bank of America argued that the November drop in gold prices was a strategic pause, including profit taking. But the fundamentals remain in place for bullion to keep rising, including a dovish Fed, geopolitical hedging, and general cautious optimism that demands balanced portfolios. Goldman Sachs was even more optimistic, issuing a price target of $4,900 by the end of 2026.

One key element supporting precious metals is the outlook for the Fed. At the moment, the market is pricing in a near 90% chance that the FOMC will ease by 25bps at its meeting next week. That will be followed by as much as 100 bps of easing next year, according to futures markets. US President Donald Trump is expected to announce his replacement for Fed Chair Powell as soon as this week, with all the candidates expected to be dovish.

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