- Gold prices inch higher, even as the US Dollar strengthens slightly following mixed PMI data.
- Traders anticipate the Fed’s interest rate decision and economic projections, with expectations of a 25 bps cut on Wednesday.
- Speculation grows over the Fed’s future monetary policy, amid concerns about potential inflationary pressures from Trump-era policies.
Gold prices saw a modest uptick at the start of the North American session, rising 0.28% early in the week as investors focus on the upcoming Federal Open Market Committee (FOMC) meeting. At the time of writing, XAU/USD is trading at $2,643, up from its opening price but retreating from its intraday high of $2,664.
The US economic calendar began quietly, with S&P Global Flash PMIs for December showing mixed results. Manufacturing activity weakened after a brief rebound last month, while the services sector posted its strongest reading of 2024.
This data provided a slight lift to the US Dollar, as the Dollar Index (DXY) edged up 0.07% to 107.01, contributing to a pullback in gold from its session highs.
The Federal Reserve is set to hold its final meeting of the year on December 17–18, with expectations of a 25 basis-point rate cut. However, traders are particularly interested in the Summary of Economic Projections (SEP) for clues on the rate trajectory heading into 2025.
Lower interest rates generally benefit gold, a non-yielding asset. However, speculation is rising that the Fed may take a cautious approach as fiscal policies under the incoming Trump administration could heighten inflationary risks.
Gold prices typically gain in environments of falling interest rates or heightened geopolitical tensions, though both factors have eased recently.
This week, the US economic docket will include key data releases such as Retail Sales, Industrial Production, the FOMC policy decision, and the core Personal Consumption Expenditures (PCE) Price Index.
Daily Market Movers: Gold Holds Steady Near $2,650
- Gold prices held firm as US real yields fell two basis points to 2.049%, providing support for the precious metal.
- The US 10-year Treasury bond yield declined by 2.5 basis points to 4.375%.
- The US Dollar Index remained steady at 107.05, showing little change.
- December’s S&P Global Manufacturing PMI dropped to 48.3, missing expectations of 49.8 and falling from 49.7.
- Meanwhile, the S&P Global Services PMI surged to 58.5, exceeding forecasts of 55.7 and up from 56.1.
- According to the CME FedWatch Tool, traders are pricing in a 96% probability of a 25 basis-point rate cut during the Fed’s meeting on Wednesday.
- Looking ahead to 2025, markets anticipate the Fed will reduce rates by a total of 100 basis points.
- Analysts at Goldman Sachs highlighted that China’s central bank might increase gold purchases during periods of local currency weakness to bolster confidence in its currency.
Technical Outlook: Gold Retreats as Sellers Target 100-Day SMA
Gold’s uptrend remains intact but is currently trading below the 50-day Simple Moving Average (SMA) at $2,670, having retreated from last week’s lows. The Relative Strength Index (RSI) has dipped below its neutral line, signaling bearish momentum.
A drop below $2,650 could expose the 100-day SMA at $2,600 as the next key support level. Further declines may see Gold targeting the August 20 peak at $2,531.
On the upside, a sustained move above $2,650 would shift focus to the 50-day SMA at $2,670, followed by the psychological resistance level of $2,700.
