Reuters said the early rally was fueled by investors flocking to safe-haven assets on intensifying geopolitical tensions, after U.S. President Trump threatened to impose extra tariffs on European countries over the control of Greenland.
Five Key Drivers Behind Last Week’s Record-Setting Performance
To recap last week’s record-setting performance, my work shows that five key events drove the price action.
Central Bank Buying Momentum Continues
The main narrative remained unchanged, with the long-term trend supported by central bank buying momentum. Gold touched multiple highs throughout the week once it cleared $4600 for the first time, driven by continued central bank accumulation as part of a structural de-dollarization strategy, particularly among Eastern economies, according to multiple analysts.
Iran Geopolitical Tensions Create Volatility
While much of the focus lately has been on the pace and amount of Fed rate cuts, geopolitical tensions moved to the forefront last week over Iran. Gold initially rallied on fears of U.S. military intervention in Iran over protest crackdowns, but then pulled back when President Trump signaled a softer stance, saying he’d been told the killings were stopping.
Fed Chair Investigation Sparks Policy Speculation
The Trump administration also made headlines when news emerged of a federal investigation into Fed Chair Jerome Powell, sparking speculation about potential leadership changes that could lead to faster interest rate cuts.
Tame Inflation Data Supports Rate Cut Expectations
U.S. economic data was also the source of volatility with tame U.S. inflation data supporting market bets on Federal Reserve cuts later in 2026, which typically benefits gold. December CPI came in at 2.7% year-over-year, matching expectations and solidifying the odds of a Fed rate cut.