By Linh Tran, Market Analyst at XS.com
Gold experienced a highly volatile year in 2025, repeatedly setting new record highs, and as of the current date (December 30, 2025), gold prices have risen by nearly 66% since the beginning of the year. The rally over most of the past year not only reflected deep macroeconomic concerns but also pushed gold into a high valuation zone, making the market more sensitive to short-term corrective factors.
Gold’s outlook for the first quarter of 2026 will depend on multiple factors, including monetary policy, economic conditions, fiscal risks, and the global geopolitical landscape.
The most important factor influencing gold prices in Q1 2026 remains the global interest rate environment, particularly the policy stance of the U.S. Federal Reserve (Fed). Although financial markets have begun to anticipate an easing cycle in 2026, U.S. economic data toward the end of 2025 indicate that the economy remains relatively resilient. This reduces the pressure on the Fed to cut interest rates early at the beginning of the year.
U.S. interest rates remain elevated, while the 10-year U.S. Treasury yield is currently fluctuating around 4.11%. This increases the opportunity cost of holding gold. In an environment where real interest rates have not declined significantly, gold is unlikely to sustain a strong and continuous upward trend in the short term. Instead, Q1 2026 is more likely to be a period of correction or consolidation for the gold market, allowing investors to reassess the easing expectations that were already priced in during 2025.
Recent U.S. economic data continue to suggest that the economy has not entered a clear downturn. The labor market remains relatively stable, while indicators such as housing sales and consumer activity demonstrate the economy’s ability to adapt to a high interest rate environment. These signals further support the view that the Fed has sufficient room to maintain a more cautious monetary policy stance for a prolonged period.
For gold, this implies that price upside driven by monetary policy factors in Q1 2026 will be limited.
Although the U.S. economy remains relatively resilient, fiscal risks continue to pose a threat. According to data from the U.S. Treasury as of December 24, 2025, U.S. public debt has exceeded USD 38.3 trillion, leading to rising interest servicing costs amid high interest rates. This represents a structural risk that is difficult to resolve in the short term.
In the coming quarter, public debt may not act as a direct catalyst for gold prices, but it plays an important role in limiting the depth of corrections in the precious metal. Over the long term, fiscal pressures remain a solid foundation reinforcing gold’s role as a store of value.
On the geopolitical front, the past week has seen positive diplomatic signals related to the Russia–Ukraine conflict, including mediation efforts and engagements between Ukraine, the United States, and Western partners. These developments have reduced the risk of short-term escalation, causing gold prices to temporarily weaken.
However, the current signals do not represent the conclusion of a peace process. Geopolitical risks remain present and could resurface if negotiations encounter obstacles. Therefore, in Q1 2026, geopolitical factors may not serve as a strong bullish catalyst but will continue to act as an important underlying support sustaining gold’s appeal.
Recently, gold recorded a decline of nearly USD 250/oz from levels around USD 4,550/oz. After repeatedly setting new highs throughout 2025, profit-taking at elevated price levels is a natural development. This correction reflects profit-taking and portfolio rebalancing rather than a long-term reversal in gold’s trend.
In my view, the outlook for gold prices in Q1 2026 leans more toward a correction and consolidation scenario rather than a strong breakout at the start of the year. The high interest rate environment and expectations that the Fed will maintain a cautious stance remain short-term headwinds, while long-term supportive factors such as fiscal and geopolitical risks continue to be present.
Nevertheless, gold’s long-term bullish trend remains intact. Q1 2026 is likely to serve as a necessary re-accumulation phase, helping gold build a more sustainable foundation before entering new upward moves when monetary conditions clearly shift toward easing or when macroeconomic risks return to the forefront.