Gold is extending its December advance in thin post-holiday trading as renewed geopolitical concerns and persistent central bank buying provide a firm foundation for the precious metal heading into 2026. The dollar is trading mixed against major counterparts, with safe-haven flows partially bypassing the greenback in favor of alternative stores of value, traders note.
The latest leg higher comes amid reports of increased official sector purchases from several emerging market economies seeking to reduce dollar exposure in their reserves. Market participants observe that central banks have maintained their strongest annual gold acquisition pace since 2022, with December typically marking a peak month for such activity. This structural demand has created a buffer against potential headwinds from shifting Federal Reserve policy expectations.
Technical analysts point to a bullish market structure that has remained intact throughout the holiday period, with momentum indicators showing sustained buying interest despite reduced liquidity. "The fact we're seeing follow-through buying when most of Europe is still on holiday tells you something about underlying conviction," said one London-based precious metals trader. Real yields on US Treasuries have moderated in recent sessions, further burnishing gold's appeal for yield-sensitive investors. Meanwhile, energy markets are providing a tailwind, with crude oil prices stabilizing after earlier volatility, reducing pressure on inflation expectations.
Looking ahead, traders are positioning for the first wave of 2026 economic data and central bank communications in early January. Market strategists emphasize that gold's performance will hinge on the interplay between Fed policy signaling and any escalation in geopolitical flashpoints. The euro is holding recent gains against the dollar, while the yen remains sensitive to any hints of Bank of Japan policy normalization, creating a complex backdrop for currency-adjusted gold returns. Currency analysts suggest that diversification away from traditional reserve assets remains a defining theme as institutions reassess portfolio allocations for the new year.
Disclaimer: This analysis is AI-generated for educational purposes. Traders should verify all information and conduct their own research before making trading decisions.