The Gold price (XAU/USD) is trading flat around $2,650 during the early Asian session on Monday.
Factors Supporting Gold
Strong central bank buying has been a significant factor. Central banks have been net buyers of gold for nearly 15 years. They value it as a crisis hedge and a reliable reserve asset. The World Gold Council expects the precious metal to rise modestly in 2025 due to central bank actions, geopolitical tensions, and economic conditions in key markets like the US, China, and India. Ongoing geopolitical tensions in the Middle East also support gold. For example, on Sunday, Israel’s government approved a plan to double its population in the occupied Golan Heights, citing threats from Syria. Such events can lead to a flight to safe assets, benefiting the Gold price.
Factors Capping Gold’s Upside
US President-elect Donald Trump’s tariff plan could stoke further inflation and delay the Federal Reserve (Fed) easing policy. The robust US economy could also lift the US Dollar (USD). When the USD gets stronger, it undermines the USD-denominated commodity price as it increases the opportunity cost of holding non-yielding bullion. An analyst at Julius Baer, Carsten Menke, said, “Generally speaking, we see a stronger U.S. economy next year, which should leave less room for rate cuts and should thus bring less tailwinds for gold.”
Upcoming Key Data and Event
Investors are bracing for the preliminary US December Purchasing Managers Index (PMI) data, which is due on Monday. Gold traders will also closely watch the Fed meeting on Wednesday. The market anticipates that the Fed will cut the interest rates by 25 basis points (bps). Attention will be on Chair Jerome Powell’s speech as it might offer some hints about US monetary policy for 2025.
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