Gold prices edged higher on Tuesday, extending a sharp rebound from the start of the week as investors recalibrated risk exposure amid heightened geopolitical tension and renewed expectations for US interest-rate cuts. The move reflects a familiar but potent combination for bullion: political uncertainty colliding with shifting monetary policy expectations, at a time when real yields remain vulnerable and portfolio hedging demand is elevated.

Geopolitics Reignite Safe-Haven Demand

The latest leg higher in gold followed escalating geopolitical uncertainty after the US capture of Venezuelan President Nicolás Maduro over the weekend. President Donald Trump’s warning that Washington could temporarily “run” Venezuela — and his threat of further action if the interim government fails to comply with US demands — has injected fresh uncertainty into global risk sentiment. While Venezuela itself represents a limited share of global economic output, investors tend to react swiftly to abrupt political disruptions, particularly those involving energy-rich regions and US military involvement.

Historically, gold has shown a tendency to spike in the immediate aftermath of geopolitical shocks, even when the long-term economic impact is unclear. This reaction reflects investor psychology as much as fundamentals, with gold serving as a portfolio stabilizer during periods when political risk is difficult to quantify. While some analysts caution that such moves can fade once headlines cool, the current environment is unusually supportive given parallel macro forces.

Rate-Cut Expectations Strengthen the Bullish Case

Beyond geopolitics, monetary policy expectations remain a critical driver. Investors are increasingly focused on Friday’s US nonfarm payrolls report, which could influence the Federal Reserve’s rate outlook for the first half of 2026. Comments from Federal Reserve Bank of Minneapolis President Neel Kashkari underscored this sensitivity, as he noted that a further rise in unemployment could increase the likelihood of policy easing.

Markets are currently pricing in two Fed rate cuts this year, despite lingering uncertainty around inflation persistence. For gold, the implication is clear: lower interest rates reduce the opportunity cost of holding a non-yielding asset, while also weakening the US dollar in real terms. That dynamic has been a central pillar of gold’s multi-year advance.

Momentum Builds on an Already Exceptional Run

Gold’s latest gains add to an already historic rally. The metal ended 2025 with a gain of roughly 64%, its strongest annual performance since 1979, and remains not far from its late-December record highs. Central-bank buying, sustained ETF inflows, and concerns over long-term fiscal sustainability in the US have provided structural support well beyond short-term trading flows.

Importantly, the current rally differs from past spikes driven solely by crisis. Today’s gold market reflects a broader reassessment of risk, diversification, and currency stability. Investors are increasingly treating gold not just as insurance, but as a strategic allocation in an era of elevated debt, geopolitical fragmentation, and uncertain policy frameworks.

What Investors Should Watch Next

Looking ahead, the durability of gold’s advance will hinge on incoming US labor data, inflation trends, and clarity around the Fed’s reaction function. Geopolitical tensions may ebb or intensify, but monetary policy expectations are likely to remain the dominant force shaping gold’s trajectory in early 2026. Any confirmation of labor-market cooling or dovish policy signals could reinforce the metal’s upward bias, while stronger-than-expected data may test the resilience of current price levels.