Gold Starts the Week Quietly as Eyes Turn to the Fed Meeting
Gold prices are showing a slight increase ahead of the Fed's monetary policy decision scheduled for this week. ANZ Research analysts indicate that while a rate cut appears almost certain at this week's Fed meeting, investors are wary that the Fed may pause rate cuts in January. Nevertheless, increasing geopolitical tensions continue to support safe haven demand, and the rise in ETF assets along with speculators increasing their net long positions is noteworthy. ANZ expects gold to reach a record level of $2,900 per ounce next year, supported by strong investment inflows, resilient physical demand, and high central bank purchases.
Gold started the week calmly, with the Fed decision awaited. The precious metal shows a slight increase at the beginning of the week, advancing toward $2,660 after a two-day decline. After experiencing a 2.6% drop in the last two trading days, gold opened the week at $2,650. Changes in risk appetite and broad movements in the U.S. dollar have contributed to the decline in gold prices recently as market expectations reshuffle. With the Fed's final meeting of the year taking place this week, central bankers are expected to cut the rate by 25 basis points from the current 4.75% level. Gold prices are heavily influenced by interest rates; as lower rates reduce the attractiveness of fixed-income assets, gold becomes more appealing.
Could U.S. inflation and the lack of stimulus details from China lead to further declines in gold? Initially, gold rose on expectations of strong stimulus from China and central bank purchases. However, the absence of concrete details from CEWC and higher-than-expected U.S. PPI data led to selling pressure. Gold ended last week with modest gains. Throughout last week, U.S. inflation data was prominent, showing that inflation remains stubbornly high and at concerning levels. During the second week of December, policymakers focused on the Fed’s interest rate decision. Expectations of a pause following a rate cut could lead to fluctuations in gold prices.
Gold could test record levels in 2025. ANZ analysts anticipate that gold will maintain its appeal as a safe haven asset due to rising geopolitical and economic uncertainties in 2025. They forecast that gold will offer returns of around 10% next year, with prices potentially reaching the $2,900 level. This expectation is shaped by geopolitical risks as well as demand support from China and India. Economic support measures from China and a fluctuating yuan could increase gold demand. India's gold consumption is also projected to remain robust due to rising incomes and decreasing import duties. While central banks continue to be active gold buyers, there is an expectation that purchases may slow slightly compared to 2024. According to ANZ's analysis, the impact of U.S. monetary policy and geopolitical developments on price momentum will be significant.
Current situation for gold in grams: Domestic gold prices reversed direction today in response to a partial increase in demand for ounces after a 2.5% pullback in the last two trading days, alongside a rising trend in the dollar exchange rate. In the first half of the day, gram gold recorded a half-point increase, stepping into the 2,990 TL range. After undergoing a correction in the first half of November, the gold price has maintained a trend of recovery in the past month.