- Gold prices edge higher despite a modest rise in the US Dollar following mixed PMI data.
- Investors focus on the Federal Reserve’s upcoming interest rate decision and economic projections, with expectations of a 25 basis point cut on Wednesday.
- Market speculation grows over the Fed’s future monetary policy amid potential inflationary pressures linked to Trump administration policies.
Gold prices edged slightly higher during the North American session at the start of the week, rising 0.28% as investors awaited the Federal Open Market Committee (FOMC) decision. At the time of writing, XAU/USD trades at $2,643, above its opening price but off the day’s high of $2,664.
The US economic calendar remains light, with mixed results from December’s S&P Global Flash PMIs. Manufacturing activity weakened after showing improvement last month, while the services sector posted its highest reading of 2024.
The data gave a slight boost to the US Dollar, with the US Dollar Index (DXY) ticking up 0.07% to 107.01. In response, gold retreated from its daily highs.
The Federal Reserve is set to hold its final meeting of the year on December 17–18. Market expectations point to a 25 basis point interest rate cut, but attention is centered on the release of the Summary of Economic Projections (SEP), which could offer insight into the interest rate trajectory for 2025.
Lower interest rates typically benefit gold, a non-yielding asset. However, speculation is mounting that the Fed may take a cautious approach amid signals of inflationary fiscal policies under the incoming Trump administration.
While gold historically gains in environments of lower interest rates and heightened geopolitical risk, both factors have eased recently.
Looking ahead, key releases on the US economic docket include Retail Sales, Industrial Production, the FOMC policy announcement, and the core Personal Consumption Expenditures (PCE) Price Index.
Daily Market Movers: Gold Prices Steady Near $2,650
- Gold prices remain supported as US real yields decline, dropping two basis points to 2.049%, providing a boost to the precious metal.
- The US 10-year Treasury bond yield fell 2.5 basis points to 4.375%.
- The US Dollar Index holds steady at 107.05, showing little change.
- December’s S&P Global Manufacturing PMI slipped from 49.7 to 48.3, falling short of expectations of 49.8.
- In contrast, the S&P Global Services PMI surged to 58.5 from 56.1, beating forecasts of 55.7.
- The CME FedWatch Tool indicates a 96% probability of a 25 basis point rate cut at Wednesday’s FOMC meeting.
- For 2025, markets anticipate the Federal Reserve will lower rates by 100 basis points.
- Analysts at Goldman Sachs suggest China’s central bank could increase gold purchases during periods of local currency weakness to strengthen confidence in the yuan.
Technical Outlook: Gold Price Pulls Back as Sellers Target 100-Day SMA
The gold price remains in an uptrend but has retreated from last week’s lows below the 50-day Simple Moving Average (SMA) of $2,670. The Relative Strength Index (RSI) has dipped below its neutral level, signaling bearish momentum.
A drop below $2,650 could expose the next support level at the 100-day SMA near $2,600. Further declines might push prices toward the August 20 high of $2,531.
On the upside, a recovery above $2,650 would target the 50-day SMA at $2,670, with additional resistance at $2,700.
