Gold recovers after sell-off as investors look to further gains in 2026

Gold prices were mixed on Tuesday morning but rebounded from a sharp sell-off in the previous session, as thin year-end trading amplified price swings and investors looked ahead to supportive fundamentals that could drive precious metals to fresh highs in 2026.

Gold futures rose 0.8% to $4,377.40 an ounce, while spot prices retreated 2.8% to $4,358.64 at the time of writing. Bullion touched a record $4,549.71 on Friday before sliding to its lowest level since December 17 on Monday, marking its steepest daily percentage decline since October 21.

“The fact that we’ve had such a significant selloff from Monday open … it just goes to show the significant volatility probably compounded by thinner trading conditions because of the holiday season,” Kyle Rodda, senior analyst at Capital.com, said.

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Gold has posted a strong performance in 2025, rising 66%, supported by expectations of interest rate cuts, bets on further US policy easing, ongoing geopolitical tensions, sustained central bank buying and growing holdings in exchange-traded funds.

“I’m expecting the longer-term rally to continue for both gold and silver, with price targets in the next six months at $5,010/oz for gold and $90.90 for silver,” said Kelvin Wong, senior market analyst at OANDA.

Oil prices were little changed on Tuesday morning after rising more than 2% in the previous session, as investors weighed developments in Ukraine peace talks to assess the risk of potential supply disruptions.

Brent crude futures were up 0.2% to $61.60 a barrel, while West Texas Intermediate rose by the same margin to $58.21.

“I think the markets are sensing that a deal is going to be very hard to come by,” said Ed Meir, an analyst at Marex.

Despite elevated concerns about possible supply interruptions, analysts said expectations of an oversupplied global oil market continued to hang over prices, limiting further gains.

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“Given the crosscurrents of US-led peace efforts and persistent oversupply concerns versus simmering geopolitical tensions – we expect WTI to continue to trade in a $55–$60 range in the near term,” IG analysts said in a note on Tuesday.

Meir added that prices were likely to trend lower in the first quarter of 2026 due to a “growing oil glut.”

Sterling was trading flat against the US dollar on Tuesday, hovering around 1.3500, but close to a more than three-month high of 1.3535 reached last week.

The currency was muted against the dollar, trading at $1.3512, and versus the euro, where it sat at €1.1475.

The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six major currencies, was flat at 98.00.

“We see the market favouring the pound because the Bank of England’s path to lower rates seems measured. This gradual approach makes the pound more attractive than currencies with more aggressive central banks,” analysts at VT Markets wrote.

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“This contrasts with the situation in the United States, where the Federal Reserve is also easing policy. With the latest core PCE inflation in the US dipping to 2.4%, traders are pricing in a potentially faster pace of cuts from the Fed in 2026. This policy divergence is the main engine driving GBP/USD towards the 1.3550 resistance level.”

Market pricing, however, points to a faster reduction in US interest rates than policymakers have signalled. According to the CME FedWatch tool, traders are highly confident that the Federal Reserve will cut borrowing costs by at least 50 basis points before the end of 2026.

In equities, the FTSE 100 (^FTSE) was higher on Tuesday morning, up 0.1% to 9,877 points. For more details on market movements, check our live coverage here.

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