Chairman Jerome Powell's post-meeting remarks and updated economic forecasts will be important. If the Fed only cuts rates modestly in 2025, gold's appeal could face headwinds as the opportunity cost of holding non-yielding assets becomes higher. Conversely, with multiple rate cuts expected, any signs of dovishness could reignite bullish momentum.
Featured inflation and PCE data
The personal consumption expenditure (PCE) price index, the Fed's preferred inflation measure, will be released two days after the meeting and could validate or challenge the Fed's forecasts. Weak PCE growth would strengthen the case for continued monetary easing and push gold higher. But stronger-than-expected inflation could prompt Powell to be cautious, limit rate cuts and weaken the short-term outlook for gold.
Central banks and geopolitics provide tailwinds
China's resumption of gold purchases in November highlighted the strength of central bank demand, providing long-term bullishness. Meanwhile, geopolitical risks, including tensions in the Gaza Strip, continue to increase gold's safe haven appeal. These factors provide important support even as gold traders weather potential headwinds from a strong US dollar and rising Treasury yields.
Market prediction: Fed decides next move
Next week's Fed meeting will be crucial. A dovish tone emphasizing multiple rate cuts in 2025 could increase the likelihood of gold's upside, while a more cautious stance could limit upside. In the longer term, gold is well-positioned to continue its strength, supported by central bank demand and accommodative monetary policy. Traders should prepare for increased volatility as the market digests the Fed's forecast and key inflation data.
Technically, we intend to maintain our bullish stance if the price sustains above $2,663.51 and switch to a bearish stance if the trade is confirmed below $2,631.04.
See our economic calendar for more information.
