Gold prices (XAU/USD) remained relatively stable above a one-week low, trading around $2,644–$2,643 during the Asian session on Monday. The modest bounce from these levels comes amid broader market expectations for a more cautious stance by the U.S. Federal Reserve (Fed) on rate cuts next year. Investors are increasingly convinced that the Fed will be hesitant to aggressively reduce interest rates, as inflation’s progress toward the 2% target appears to have stalled. This view has contributed to higher U.S. Treasury bond yields, acting as a headwind for the non-yielding gold market.
As market participants await the outcome of the critical Federal Open Market Committee (FOMC) policy meeting on Wednesday, traders are reluctant to make bold directional bets on gold. Many are opting to stay on the sidelines until the central bank’s decision, with some focusing on short-term opportunities from the release of global flash Purchasing Managers’ Index (PMI) data.
Despite this caution, a modest pullback in U.S. bond yields has helped ease pressure on the U.S. dollar, weakening the greenback and providing some support for gold. Additionally, ongoing geopolitical tensions and uncertainties regarding U.S. President-elect Donald Trump’s policies have bolstered demand for the precious metal, often viewed as a safe-haven asset during times of crisis.
Geopolitical Developments Add to Market Anxiety
In the Middle East, Israel has announced plans to expand its presence in the Golan Heights, doubling its population in the contested region. This move raises the risk of further escalation in an already volatile area. Israeli military actions in Gaza resulted in at least 53 Palestinian deaths, while the Israeli military claimed to have killed dozens of militants in the north of the enclave.
Further complicating the geopolitical landscape, NATO Secretary General Mark Rutte issued a stark warning about Russian President Vladimir Putin’s ambitions, suggesting that Putin aims to erase Ukraine from the map and may target other parts of Europe. Meanwhile, Israeli airstrikes on missile launchers and radar systems in southern and eastern Syria have added to regional instability, with the Syrian Observatory for Human Rights reporting significant damage.
Fed Policy Expectations and Market Outlook
The CME Group’s FedWatch Tool now indicates a 93% likelihood that the Fed will cut borrowing costs by 25 basis points at its Wednesday meeting. Last week’s release of the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) reinforced expectations that the Fed will slow the pace of its rate cuts in 2024. This outlook helped push the yield on the benchmark 10-year U.S. Treasury bond to a three-week high on Friday, further limiting the upside potential for gold, which does not offer yield.
Gold price movements this week are likely to be heavily influenced by the Fed’s policy decision and the accompanying statements from Fed Chair Jerome Powell. Investors will be closely watching for any signals regarding future interest rate policies, as well as the central bank’s stance on inflation and economic growth.
Technical Outlook for Gold
From a technical perspective, the recent low around $2,644–$2,643 coincides with a congestion zone, with some follow-through selling potentially pushing gold prices toward the $2,625 region. A move below this support zone could lead to further declines, with key levels to watch at $2,614 and $2,600. A break below these areas would signal a bearish outlook for gold, potentially triggering deeper losses.
On the upside, the immediate resistance is found in the $2,665–$2,666 range, followed by a stronger hurdle at $2,677. Should gold break above these levels, it could target the $2,700 mark, and further gains could extend toward the monthly swing high around $2,726. A decisive breakout above this level would suggest a more sustained rally for gold in the near term.
As traders await the outcome of the FOMC meeting and other key economic data releases, gold remains a focal point for investors navigating both global risks and domestic monetary policy shifts.
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