Gold Moves Steadily Ahead of Fed Decision

This week, which investors are carefully monitoring for insights into 2025, spot gold is stabilizing around $2,640 ahead of the Federal Reserve's two-day meeting. The general expectation is that the Fed will cut interest rates by 25 basis points; however, rising inflation expectations under the new Trump administration create uncertainty about the magnitude of future rate cuts.

The faster growth of private sector activities in the U.S. during December indicates that the Fed may limit interest rate cuts next year. It is thought that this may reduce demand for the precious metal. Nevertheless, gold has risen by about 29% this year, marking the largest annual gain since 2010. The easing of U.S. policies, demand for safe-haven assets, and global central bank purchases have contributed to this increase.

Geopolitical and economic factors are directing gold prices. The reduction of geopolitical risks and discussions about inflation risks in the U.S. are making investors who expect a cautious stance from the Fed more watchful about future price movements. The current horizontal movement of gold does not create a suitable ground for short-term increases, while Trump’s protectionist policies and growth-oriented steps are raising expectations of heat in the U.S. economy.

This situation is causing upward pressure on U.S. 10-year Treasury yields, continuing the pressure on gold prices. This week, the Fed's forward guidance has become more significant than its interest rate decision. Many analysts believe that gold may not replicate its performance from 2024 next year; however, it could reach record levels with a rise up to $2,900.

Currently, gold moves within a narrow band of $2,630 to $2,650. While it gained momentum towards $2,700 over the past month, it faced strong resistance at this point. The demand area for gold has dipped to $2,620, and any increase in demand from these levels could allow the precious metal to gain momentum towards the $2,700 range. However, the reduction of geopolitical risks and U.S. economic data continue to pressure gold in the short term.