Gold prices (XAU/USD) remained stable just below $2,650 during the early Asian trading session on Monday, as investors await key economic data and navigate a complex mix of geopolitical and market factors.
The precious metal’s performance has been bolstered by significant demand from central banks, which have been net buyers of gold for nearly 15 years. This consistent buying trend underscores gold’s status as a crisis hedge and a reliable reserve asset. The World Gold Council forecasts modest gains for gold in 2025, driven by central bank activity, ongoing geopolitical tensions, and economic conditions in major markets like the US, China, and India.
Geopolitical factors continue to play a key role in the market’s sentiment. On Sunday, Israel’s government approved a plan to double its population in the occupied Golan Heights, citing security concerns related to Syria. According to Reuters, any escalation in tensions in this region could prompt a flight to safe-haven assets, offering further support to gold prices.
On the economic front, investors are closely monitoring the US’s economic indicators. The US December Purchasing Managers Index (PMI), scheduled for release later on Monday, is expected to provide fresh market direction. While the PMI data will be scrutinized for any signs of a slowdown, there are concerns that the strength of the US economy could exert pressure on gold. A stronger economy, combined with President-elect Donald Trump’s proposed tariff policies, could fuel inflationary pressures and delay any Federal Reserve easing, potentially boosting the US Dollar (USD) and diminishing gold’s appeal as a non-yielding asset.
Carsten Menke, an analyst at Julius Baer, noted, “We expect a stronger US economy next year, which should leave less room for rate cuts and could reduce gold’s upside potential.”
The focus now shifts to Wednesday’s Federal Reserve meeting, where analysts anticipate a 25 basis point interest rate cut. Market participants will be particularly attentive to Fed Chair Jerome Powell’s speech, which could offer crucial insights into the central bank’s stance on monetary policy heading into 2025.
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