Gold prices (XAU/USD) showed modest gains on Monday, recovering from a one-week low to trade near $2,655. A dip in U.S. Treasury bond yields pressured the U.S. Dollar (USD), providing some support for the precious metal. Additionally, ongoing geopolitical risks and uncertainties surrounding U.S. President-elect Donald Trump’s policies helped sustain the appeal of gold as a safe-haven asset.
However, expectations that the Federal Reserve (Fed) will slow its rate-cutting cycle are weighing on gold’s upward momentum. Analysts note signs of stalled progress in reducing inflation toward the Fed’s 2% target, prompting investors to remain cautious. Traders are holding off on major moves ahead of the Federal Open Market Committee’s (FOMC) two-day monetary policy meeting, set to begin Tuesday.
Despite these headwinds, gold has managed to stabilize after retreating from a one-month high last week.
Geopolitical Developments Support Gold’s Safe-Haven Appeal
A series of geopolitical events has heightened global uncertainty, further influencing gold prices:
– Middle East Tensions: Israel’s plans to expand settlements in the Golan Heights and ongoing military operations in Gaza have escalated tensions, with reports of significant casualties and militant activities.
– Russian Threats in Europe: NATO Secretary General Mark Rutte warned of Russian President Vladimir Putin’s intentions to target Ukraine and potentially other parts of Europe.
– Syrian Strikes: Israeli fighter jets reportedly targeted missile systems and radar installations in southern and eastern Syria, intensifying regional instability.
Fed Policy and Economic Indicators in Focus
Market sentiment remains cautious as traders anticipate the Fed’s monetary policy decision on Wednesday. The CME Group’s FedWatch Tool suggests a 93% likelihood of a 25-basis-point rate cut, reflecting expectations of a slowdown in the Fed’s rate-cutting approach.
Last week’s U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) reports supported these projections, showing inflationary pressures that could constrain the Fed’s dovish stance. Additionally, the yield on the 10-year U.S. Treasury bond hit a three-week high on Friday, further limiting gold’s gains as a non-yielding asset.
Upcoming global flash Purchasing Managers’ Index (PMI) data on Monday may influence risk sentiment and gold’s movement ahead of the critical FOMC meeting. Market participants will closely monitor Fed Chair Jerome Powell’s remarks and the accompanying policy statement for further cues.
For now, gold prices remain caught between safe-haven demand and economic headwinds, with traders awaiting more clarity from upcoming economic and geopolitical developments.