Chair Jerome Powell’s post-meeting remarks and the updated economic projections will be critical. If the Fed signals only a modest number of rate cuts in 2025, gold’s appeal could face headwinds due to the higher opportunity cost of holding the non-yielding asset. Conversely, indications of a dovish stance, with multiple cuts forecasted, could reignite bullish momentum.
Inflation and PCE Data in Focus
The Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, will be released two days after the meeting and could validate or challenge the central bank’s projections. A soft PCE print would strengthen the case for continued monetary easing, bolstering gold. However, stickier-than-expected inflation could prompt a cautious tone from Powell, potentially limiting rate cuts and dampening gold’s short-term prospects.
Central Banks and Geopolitics Provide Tailwinds
China’s renewed gold purchases in November have underscored strong central bank demand, adding a long-term bullish factor. Meanwhile, geopolitical risks, including tensions in Gaza, continue to enhance gold’s safe-haven allure. These factors provide critical support even as gold traders navigate potential headwinds from a strong U.S. dollar and elevated Treasury yields.
Market Forecast: Fed to Dictate Next Moves
Next week’s Fed meeting will be pivotal. A dovish tone with an emphasis on multiple 2025 rate cuts could fuel gold’s upside potential, while a more cautious stance may cap gains. Long-term, gold remains well-positioned for sustained strength, supported by central bank demand and easing monetary policies. Traders should prepare for heightened volatility as markets digest the Fed’s projections and key inflation data.
Technically, I’ll maintain a bullish stance if the price sustains above $2,663.51, and shift bearish on confirmed trading activity below $2,631.04.
More Information in our Economic Calendar.